The Issue Kindred Hospitals East, LLC ("Kindred") and Select Specialty Hospital-Palm Beach, Inc. ("Select-Palm Beach"), filed applications for Certificates of Need ("CONs") with the Agency for Health Care Administration ("AHCA" or the "Agency") seeking approval for the establishment of long-term care hospitals ("LTCHs") in Palm Beach County, AHCA District 9. Select-Palm Beach's application, CON No. 9661, seeks approval for the establishment of a 60-bed freestanding LTCH in "east central" Palm Beach County about 20 miles south of Kindred's planned location. Kindred's application, CON No. 9662, seeks approval for the establishment of a 70-bed LTCH in the "north central" portion of the county. The ultimate issue in this case is whether either or both applications should be approved by the Agency.
Findings Of Fact Long Term Care Hospitals Of the four classes of facilities licensed as hospitals by the Agency, "Class I or general hospitals," includes: General acute care hospitals with an average length of stay of 25 days or less for all beds; Long term care hospitals, which meet the provisions of subsection 59A-3.065(27), F.A.C.; and, Rural hospitals designated under Section 395, Part III, F.S. Fla. Admin. Code R. 59A-3.252(1)(a). This proceeding concerns CON applications for the second of Florida's Class I or general hospitals: LTCHs. A critically ill patient may be admitted and treated in a general acute care hospital, but, if the patient cannot be stabilized or discharged to a lower level of care on the continuum of care within a relatively short time, the patient may be discharged to an LTCH. An LTCH patient is almost always "critically catastrophically ill or ha[s] been." (Tr. 23). Typically, an LTCH patient is medically unstable, requires extensive nursing care with physician oversight, and often requires extensive technological support. The LTCH patient usually fits into one or more of four categories. One category is patients in need of pulmonary/respiratory services. Usually ventilator dependent, these types of LTCH patients have other needs as well that requires "complex comprehensive ventilator weaning in addition to meeting ... other needs." (Tr. 26). A second category is patients in need of wound care whose wound is life-threatening. Frequently compromised by inadequate nutrition, these types of LTCH patients are often diabetic. There are a number of typical factors that may account for the seriousness of the wound patient's condition. The job of the staff at the LTCH in such a case is to attend to the wound and all the other medical problems of the patient that have extended the time required for care of the wound. A third category is patients with some sort of neuro-trauma. These patients may have had a stroke and are often elderly; if younger, they may be victims of a car accident or some other serious trauma. They typically have multiple body systems that require medical treatment, broken bones and a closed head injury for example, that have made them "very sick and complex." (Tr. 27). The fourth category is referred to by the broad nomenclature of "medically complex" although it is a subset of the population of LTCH patients all of whom are medically complex. The condition of the patients in this fourth category involves two or more body systems. The patients usually present at the LTCH with "renal failure ... [and] with another medical condition ... that requires a ventilator ..." Id. In short, LTCHs provide extended medical and rehabilitative care to patients with multiple, chronic, and/or clinically complex acute medical conditions that usually require care for a relatively extended period of time. To meet the definition of an LTCH a facility must have an average length of inpatient stay ("ALOS") greater than 25 days for all hospital beds. See Fla. Admin. Code R. 59A-3.065(34). The staffs at general acute care hospitals and LTCHs have different orientations. With a staff oriented toward a patient population with a much shorter ALOS, the general acute care hospital setting may not be appropriate for a patient who qualifies for LTCH services. The staff at a general acute care hospital frequently judges success by a patient getting well in a relatively short time. It is often difficult for general acute care hospital staff to sustain the interest and effort necessary to serve the LTCH patient well precisely because of the staff's expectation that the patient will improve is not met in a timely fashion. As time goes by, that expectation continues to be frustrated, a discouragement to staff. The LTCH is unlike other specialized health care settings. The complex, medical, nursing, and therapeutic requirements necessary to serve the LTCH patient may be beyond the capability of the traditional comprehensive medical rehabilitation ("CMR") hospital, nursing home, skilled nursing facility ("SNF"), or, the skilled nursing unit ("SNU"). CMR units and hospitals are rarely, if ever, appropriate for the LTCH patient. Almost invariably, LTCH patients are not able to tolerate the minimum three (3) hours of therapy per day associated with CMR. The primary focus of LTCHs, moreover, is to provide continued acute medical treatment to the patient that may not yet be stable, with the ultimate goal of getting the patient on the road to recovery. In comparison, the CMR hospital treats medically stable patients consistent with its primary focus of restoring functional capabilities, a more advanced step in the continuum of care. Services provided in LTCHs are distinct from those provided in SNFs or SNUs. The latter are not oriented generally to patients who need daily physician visits or the intense nursing services or observations needed by an LTCH patient. Most nursing and clinical personnel in SNFs and SNUs are not experienced with the unique psychosocial needs of long-term acute care patients and their families. An LTCH is distinguished within the healthcare continuum by the high level of care the patient requires, the interdisciplinary treatment model it follows, and the duration of the patient's hospitalization. Within the continuum of care, LTCHs occupy a niche between traditional acute care hospitals that provide initial hospitalization care on a short-term basis and post-acute care facilities such as nursing homes, SNFs, SNUs, and comprehensive medical rehabilitation facilities. Medicare has long recognized LTCHs as a distinct level of care within the health care continuum. The federal government's prospective payment system ("PPS") now treats the LTCH level of service as distinct with its "own DRG system and ... [its] own case rate reimbursement." (Tr. 108). Under the LTCH PPS, each patient is assigned an LTC- DRG (different than the DRG under the general hospital DRG system) with a corresponding payment rate that is weighted based on the patient diagnosis and acuity. The Parties The Agency is the state agency responsible for administering the CON Program and licensing LTCHs and other hospital facilities pursuant to the authority of Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. Select-Palm Beach is the applicant for a free-standing 60-bed LTCH in "east Central Palm Beach County," Select Ex. 1, stamped page 12, near JFK Medical Center in AHCA District 9. Its application, CON No. 9661, was denied by the Agency. Select-Palm Beach is a wholly owned subsidiary of Select Medical Corporation, which provides long term acute care services at 83 LTCHs in 24 states, four of which are freestanding hospitals. The other 79 are each "hospitals-in-a- hospital" ("HIH" or "LTCH HIH"). Kindred is the applicant for a 70-bed LTCH to be located in the north central portion of Palm Beach County in AHCA District 9. Its application, CON No. 9662, was denied by the Agency. Kindred is a wholly owned subsidiary of Kindred Healthcare, Inc. ("Kindred Healthcare"). Kindred Healthcare operates 73 LTCHs, 59 of which are freestanding, according to the testimony of Mr. Novak. See Tr. 56-57. Kindred Healthcare has been operating LTCHs since 1985 and has operated them in Florida for more than 15 years. At the time of the submission of Kindred's application, Kindred Healthcare's six LTCHs in Florida were Kindred-North Florida, a 60-bed LTCH in Pinellas County, AHCA District 5; Kindred-Central Tampa, with 102 beds, and Kindred-Bay Area- Tampa, with 73 beds, both in Hillsborough County, in AHCA District 6; Kindred-Ft. Lauderdale with 64 beds and Kindred- Hollywood with 124 beds, both in Broward County, ACHA District 10; and Kindred-Coral Gables, with 53 beds, in Dade County, AHCA District 11. The Applications and AHCA's Review The applications were submitted in the first application cycle of 2003. Select-Palm Beach's application is CON No. 9661; Kindred's is CON No. 9662. Select-Palm Beach estimates its total project costs to be $12,856,139. Select-Palm Beach has not yet acquired the site for its proposed LTCH, but did include in its application a map showing three priority site locations, with its preferred site, designated "Site 1," located near JFK Medical Center. At $12,937,419, Kindred's estimate of its project cost is slightly more than Select-Palm Beach's. The exact site of Kindred's proposed LTCH had not been determined at the time of hearing. Kindred's preference, however, is to locate in the West Palm Beach area in the general vicinity of St. Mary's Hospital, in the northern portion of Palm Beach County along the I-95 corridor. This is approximately 15 to 20 miles north of Select's preferred location for its LTCH. There is no LTCH in the five-county service area that comprises District 9: Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. There are two LTCHs in adjacent District 10 (to the south). They have a total of 188 beds and an average occupancy of 80 percent. The Agency views LTCH care as a district-wide service primarily for Medicare patients. At the time of the filing of the applications, the population in District 9 was over 1.6 million, including about 400,000 in the age cohort 65 and over. About 70 percent of the District 9 population lives in Palm Beach County. More than 70 percent of the District's general acute care hospitals are located in that county. Kindred's preferred location for its LTCH is approximately 40 to 50 miles from the closest District 10 LTCH; Select-Palm Beach is approximately 25 to 35 miles from the closest District 10 LTCH. The locations of Select Palm-Beach's and Kindred's proposed LTCHs are complementary. The SAAR Following its review of the two applications, AHCA issued its State Agency Action Report ("SAAR"). Section G., of the report, entitled "RECOMMENDATION," states: "Deny Con #9661 and CON #9662." Agency Ex. 2, p. 43. On June 11, 2003, the report was signed by Karen Rivera, Health Services and Facilities Consultant Supervisor Certificate of Need, and Mr. Gregg as the Chief of the Bureau of Health Facility Regulation. It contained a section entitled "Authorization for Agency Action" that states, "[a]uthorized representatives of the Agency for Health Care Administration adopted the recommendations contained herein and released the State Agency Action Report." Agency Ex. 2, p. 44. The adoption of the recommendations is the functional equivalent of preliminary denial of the applications. In Section F. of the SAAR under the heading of "Need," (Agency Ex. 2, p. 40), the Agency explained its primary bases for denial; it concluded that the applicants had not shown need for an LTCH in AHCA District 9. The discussions for the two, although not precisely identical, are quite similar: Select Specialty Hospital-Palm Beach, Inc.(CON #9661): The applicant's two methodological approaches to demonstrate need are not supported by any specific discharge studies or other data, including DRG admission criteria from area hospitals regarding potential need. The applicant also failed to provide any supporting documentation from area physicians or other providers regarding potential referrals. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Kindred Hospitals East, L.L.C. (CON #9662): The various methodological approaches presented are not supported by any specific DRG admission criteria from area hospitals suggesting potential need. The applicant provided numerous letters of support for the project from area hospitals, physicians and case managers. However, the number of potential referrals of patients needing LTCH services was not quantified. It was further not demonstrated that patients that qualify for LTCH services are not currently being served or that an access problem exists for residents in District 9. Id. At hearing, the Agency's witness professed no disagreement with the SAAR and continued to maintain the same bases contained in the SAAR for the denials of the two applications The SAAR took no issue with either applicant's ability to provide quality care. It concluded that funding for each applicant was likely to be available and that each project appeared to be financially feasible once operating. The SAAR further stated that there were no major architectural concerns regarding Kindred's proposed facility design, but noted reservations regarding the need for further study and revision of Select Palm-Beach's proposed surgery/procedure wing, as well as cost uncertainties for Select Palm Beach because of such potential revisions. By the time of final hearing, however, the parties had stipulated to the reasonableness of each applicant's proposed costs and methods of construction. The parties stipulated to the satisfaction of a number of the statutory CON criteria by the two applicants. The parties agreed that the applications complied with the content and review process requirements of sections 408.037 and 409.039, Florida Statutes, with one exception. Select reserved the issue of the lack of a Year 2 of Schedule 6, (Staffing) in Kindred's application. The form of Schedule 6 provided by AHCA to Kindred (unlike other schedules of the application) does not clearly indicate that a second year of staffing data must be provided. The remainder of the criteria stipulated and the positions of the parties as articulated in testimony at hearing and in the proposed orders that were submitted leave need as the sole issue of consequence with one exception: whether Kindred has demonstrated that its project is financially feasible in the long term. Kindred's Long Term Financial Feasibility Select-Palm Beach contends that Kindred's project is not financially feasible in the long term for two reasons. They relate to Kindred's application and are stated in Select Palm Beach's proposed order: Kindred understated property taxes[;] Kindred completely fails to include in its expenses on Schedule 8, patient medical assistance trust fund (PMATF) taxes [citation omitted]. Proposed Recommended Order of Select-Palm Beach, Inc., p. 32, Finding of Fact 97. Raised after the proceeding began at DOAH by Select- Palm Beach, these two issues were not considered by AHCA when it conducted its review of Kindred's application because the issues were not apparent from the face of the application. AHCA's Review of Kindred's Application Kindred emerged from a Chapter 11 bankruptcy proceedings on April 20, 2001, under a plan of reorganization. With respect to the events that led to the bankruptcy proceeding and the need to review prior financial statements, AHCA made the following finding in the SAAR: Under the plan [of reorganization], the applicant [Kindred] adopted the fresh start accounting provision of SOP 90-7. Under fresh start accounting, a new reporting entity is created and the recorded amounts of assets and liabilities are adjusted to reflect their estimated fair values. Accordingly, the prior period financial statements are not comparable to the current period statements and will not be considered in this analysis. Agency Ex. 2, p. 30. The financial statements provided by Kindred as part of its application show that Kindred Healthcare, Kindred's parent, is a financially strong company. The information contained in Kindred's CON application filed in 2003 included Kindred Healthcare's financial statements from the preceding calendar year. Kindred Healthcare's Consolidated Statement of Operations for the year ended December 31, 2002, showed "Income from Operations" to be more than $33 million, and net cash provided by operating activities (cash flow) of over $248 million for the period. Its Consolidated Balance Sheet as of December 31, 2002, showed cash and cash equivalents of over $244 million and total assets of over $1.6 billion. In light of the information contained in Kindred's CON application, the SAAR concluded with regard to short term financial feasibility: Based on the audited financial statements of the applicant, cash on hand and cash flows, if they continue at the current level, would be sufficient to fund this project as proposed. Funding for all capital projects, with the support of its parent, is likely to be available as needed. Agency Ex. 2, p. 30 (emphasis supplied). The SAAR recognized that Kindred projected a "year two operating loss for the hospital of $287,215." Agency Ex. 2, p. Nonetheless, the SAAR concludes on the issue of financial feasibility, "[w]ith continued operational support from the parent company, this project [Kindred's] is considered financially feasible." Id. The Agency did not have the information, however, at the time it reviewed Kindred's application that Kindred understated property taxes and omitted the Public Medicaid Trust Fund and Medical Assistance Trust Fund ("PMATF") "provider tax" of 1.5 percent that would be imposed on Kindred's anticipated revenues of $11,635,919 as contended by Select-Palm Beach. Consistent with Select Palm-Beach's general contentions about property taxes and PMATF taxes, "Kindred acknowledges that it likely understated taxes to be incurred in the operation of its facility." Kindred's Proposed Recommended Order, paragraph 50, p. 19. The parties agree, moreover, that the omitted PMATF tax is reasonably projected to be $175,000. They do not agree, however, as to the impact of the PMATF tax on year two operating loss. The difference between the two (approximately $43,000) is attributable to a corporate income tax benefit deduction claimed by Kindred so that the combination of the application's projected loss, the omitted PMATF tax, and the deduction yields a year two operating loss of approximately $419,000. Without taking into consideration the income tax benefit, Select-Palm Beach contends that adding in the PMATF tax produces a loss of $462,000. Kindred and Select-Palm Beach also disagree over the projection of property taxes by approximately $50,000. Kindred projects that the property taxes in year two of operation will be approximately $225,000 instead of the $49,400 listed in the application. Select-Palm Beach projects that they will be $50,000 higher at approximately $275,000. Whether Kindred's or Select-Palm Beach's figures are right, Kindred makes two points. First, if year two revenues and expenses, adjusted for underestimated and omitted taxes, are examined on a quarterly basis, the fourth quarter of year two has a better bottom line than the earlier quarters. Not only will the fourth quarter bottom line be better, but, using Kindred's figures, the fourth quarter of year two of operations is profitable. Second, and most importantly given the Agency's willingness to credit Kindred with financial support from its parent, Kindred's application included in its application an interest figure of $1.2 million for year one of operation and $1.03 million for year two. Kindred claims in its proposed recommended order that "[i]n reality ... this project will incur no interest expense as Kindred intends to fund the project out of cash on hand, or operating capital, and would not have to borrow money to construct the project." Id., at paragraph 54, p. 20. Through the testimony of John Grant, Director of Planning and Development for Kindred's parent, Kindred Healthcare, Kindred indicated at hearing that its parent might, indeed, fund the project: A ... Kindred [Healthcare] would likely fund this project out of operating capital. Like I said, in the first nine months of this year Kindred had operating cash flow of approximately $180 million. So it's not as if we would have to actually borrow money to complete a project like this. Q And what was the interest expense that you had budgeted in Year Two for this facility? A $1,032,000. Q ... so is it your statement then that this facility would not owe any interest back to the parent company? A That's correct. Tr. 221-222 (emphasis supplied). If the "financing interest" expense is excluded from Kindred's statement of projected expenses in Schedule 8 of the CON application, using Kindred's revised projections, the project shows a profit of approximately $612,0002 for the second year of operation. If Select-Palm Beach's figures and bottom line loss excludes the "finances interest" expense, the elimination of the expense yields of profit for year two of operations in excess of $500,000. If the support of Kindred's parent is considered as the Agency has signaled its willingness to do and provided that the project is, in fact, funded by Kindred Healthcare rather than financed through some other means that would cause Kindred to incur interest expense, Kindred's project is financially feasible in the long term. With the exception of the issue regarding Kindred's long term financial feasibility, as stated above, taken together, the stipulation and agreements of the parties, the Agency's preliminary review contained in the SAAR, and the evidence at hearing, all distill the issues in this case to one overarching issue left to be resolved by this Recommended Order: need for long term care hospital beds in District 9. Need for the Proposals From AHCA's perspective prior to the hearing, the only issue in dispute with respect to the two applications is need. This point was made clear by Mr. Gregg's testimony at hearing in answer to a question posed by counsel for Select-Palm Beach: Q. ... Assuming there was sufficient need for 130 beds in the district is there any reason why both applicants shouldn't be approved in this case, assuming that need? A. No. (Tr. 398). Both applicants contend that the application each submitted is superior to the other. Neither, however, at this point in the proceeding, has any objection to approval of the other application provided its own application is approved. Consistent with its position that both applications may be approved, Select-Palm Beach presented testimony through its health care planner Patricia Greenberg3 that there was need in District 9 for both applicants' projects. Her testimony, moreover, rehabilitated the single Kindred methodology of three that yielded numeric need less than the 130 beds proposed by both applications: Q ... you do believe that there is a need for both in the district. A I believe there's a need for two facilities in the district. Q It could support two facilities? A Oh, absolutely. Q And the disagreement primarily relates to the conservative approach of Kindred in terms of not factoring in out-migration and the narrowing the DRG categories? A Correct. ... Kindred actually had three models. Two of them support both facilities, but it's the GMLOS model that I typically rely on, and it didn't on the surface support both facilities. That's why I reconciled the two, and I believe that's the difference, is just the 50 DRGs and not including the out-migration. That would boost their need above the 130, and two facilities would give people alternatives, it would foster competition, and it would really improve access in that market. Tr. 150-51. Need for the applications, therefore, is the paramount issue in this case. Since both applicants are qualified to operate an LTCH in Florida, if need is proven for the 130 beds, then with the exception of Kindred's long term financial feasibility, all parties agree that there is no further issue: both applications should be granted. No Agency Numeric Need Methodology The Agency has not established a numeric need methodology for LTCH services. Consequently, it does not publish a fixed-need pool for LTCHs. Nor does the Agency have "any policy upon which to determine need for the proposed beds or service." See Fla. Admin. Code R. 59C-1.008(2)(e)1. Florida Administrative Code Rule 59C-1.008(2), which governs "Fixed Need Pools" (the "Fixed Need Pools Rule") states that if "no agency policy exist" with regard to a needs assessment methodology: [T]he applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Fla. Admin. Code R. 59C-1.008(2)(e)2. The Fixed Need Pools Rule goes on to elaborate in subparagraph (e)3 that "[t]he existence of unmet need will not be based solely on the absence of a health service, health care facility, or beds in the district, subdistrict, region or proposed service area." Population, Demographics and Dynamics The first of the four topics to be addressed when an applicant is responsible for demonstrating need through a needs assessment methodology is "population, demographics and dynamics." The Agency has not defined service areas for LTCHs. Nonetheless, from a health planning perspective, it views LTCH services as being provided district-wide primarily for Medicare patients. Consistent with the Agency's view, Select-Palm Beach identified the entire district, that is, all of AHCA District 9, as its service area. It identified Palm Beach County, one of the five counties in AHCA District 9, as its primary service area. In identifying the service area for Select-Palm Beach, Ms. Greenberg drew data from various sources: population estimates for Palm Beach County and surrounding areas; the number of acute care hospital beds in the area; the number of LTCH beds in the area; the types of patients treated at acute care hospitals; and the lengths of stay of the patients treated at those hospitals. AHCA District 9 has more elderly than any other district in the State, and Palm Beach County has more than any other county except for Dade. Palm Beach County residents comprise 71% of the District 9 population. It is reasonably projected that the elderly population (the "65 and over" age cohort) in Palm Beach County is projected to grow at the rate of 8 percent by 2008. The "65 and over" age cohort is significant because the members of that cohort are most likely to utilize hospital services, including LTCH services. Its members are most likely to suffer complications from illness and surgical procedures and more likely to have co-morbidity conditions that require long- term acute care. Persons over 65 years of age comprise approximately 80 percent of the patient population of LTCH facilities. Both Select-Palm Beach and Kindred project that approximately 80 percent of their admissions will come from Medicare patients. Since 90 percent of admissions to an LTCH come from acute care facilities, most of the patient days expected at Select-Palm Beach's proposed LTCH will originate from residents in its primary service area, Palm Beach County. When looking at the migration pattern for patients at acute care facilities within Palm Beach County, the majority (90 percent) come from Palm Beach County residents. Thus, Select- Palm Beach's projected primary service area is reasonable. Just as Select-Palm Beach, Kindred proposes to serve the entire District. Kindred proposes that its facility be based in Palm Beach County because of the percentage of the district's population in the county as well as because more than 70% of the district's general acute care hospitals are in the county. Its selection of the District as its service area, consistent with the Agency's view, is reasonable. Currently there are no LTCHs in District 9. Availability, Utilization and Quality of Like Services The second topic is "availability, utilization and quality of like services." There are no "like" services available to District residents in the District. Select-Palm Beach and Kindred, therefore, contend that they meet the criteria of the second topic. There are like services in other AHCA Districts. For example, AHCA District 10 has at total of 188 beds at two Kindred facilities in Fort Lauderdale and Hollywood. The Agency, however, did not present evidence of their quality, that they were available or to what extent they are utilized by the residents of AHCA District 9. Medical Treatment Trends The third topic is medical treatment trends. Caring for patients with chronic and long term care needs is becoming increasingly more important as the population ages and as medical technology continues to emerge that prolongs life expectancies. Through treatment provided the medically complex and critically ill with state of the art mechanical ventilators, metabolic analyzers, and breathing monitors, LTCHs meet needs beyond the capability of the typical general acute care hospitals. In this way, LTCHs fill a niche in the continuum of care that addresses the needs of a small but growing patient population. Treatment for these patients in an LTCH, who otherwise would be cared for without adequate reimbursement to the general acute care hospital or moved to an alternative setting with staff and services inadequate to meet their needs, is a medical trend. Market Conditions The fourth topic to be addressed by the applicant is market conditions. The federal government's development of a distinctive prospective payment system for LTCHs (LTC-DRG), has created a market condition favorable to LTCHs. General acute care hospitals face substantial losses for the medically complex patient who uses far greater resources than expected on the basis of individual diagnoses. Medicare covers between 80 and 85 percent of LTCH patients. The remaining patients are covered by private insurance, managed care and Medicaid. LTCH programs allow for shorter lengths of stay in a general acute care facility, reduces re-admissions and provide more discharges to home. These benefits are increasingly recognized. Numeric Need Analysis Kindred presented a set of needs assessment methodologies that yielded numeric need for the beds applied for by Kindred. Select-Palm Beach did the same. Unlike Kindred, however, all of the needs assessment methodologies presented by Select-Palm Beach demonstrated numeric need in excess of the 130 beds proposed by both applications. Select-Palm Beach's methodologies, overall, are superior to Kindred's. Select-Palm Beach used two sets of needs assessment methodologies and sensitivity testing of one of the sets that confirmed the methodology's reasonableness. The two sets or needs assessment methodologies are: (1) a use rate methodology and (2) length of stay methodologies. The use rate methodology yielded projected bed need for Palm Beach County alone in excess of the 130 beds proposed by the two applicants. For the year "7/05 - 6/06" the bed need is projected to be 256; for the year "7/06 - 6/07" the bed need is projected to be 261; and, for the year "7/07 - 6/08" the bed need is projected to be 266. See Select Ex. 1, Bates Stamp p. 000036 and the testimony of Ms. Greenberg at tr. 114. If the use rate analysis had been re-computed to include two districts whose data was excluded from the analysis, the bed need yielded for Palm Beach County alone was 175 beds, a numeric need still in excess of the 130 beds proposed by both applicants. The use rate methodology is reasonable.4 The length of stay methodologies are also reasonable. These two methodologies also yielded numeric need for beds in excess of the 130 beds proposed. The two methodologies yielded need for 167 beds and 250 beds. Agency Denial The Agency's general concerns about LTCHs are not without basis. For many years, there were almost no LTCH CON applications filed with the Agency. A change occurred in 2002. The change in the LTCH environment in the last few years put AHCA in the position of having "to adapt to a rapidly changing situation in terms of [Agency] understanding of what has been going on in recent years with long-term care hospitals." (Tr. 358.) "... [I]n the last couple of years long-term care hospital applications have become [AHCA's] most common type of application." (Tr. 359.) At the time of the upsurge in applications, there was "virtually nothing ... in the academic literature about long- term care hospitals ... that could [provide] ... an understanding of what was going on ... [nor was there anything] in the peer reviewed literature that addressed long-term care hospitals" id., and the health care planning issues that affected them. Two MedPAC reports came out, one in 2003 and another in 2004. The 2003 report conveyed the information that the federal government was unable to identify patients appropriate for LTCH services, services that are overwhelmingly Medicare funded, because of overlap of LTCH services with other types of services. The 2004 report gave an account of the federal government decision to change its payment policy for a type of long-term care hospitals that are known as "hospitals-within- hospitals" (tr. 368) so that "hospitals within hospitals as of this past summer [2004] can now only treat 25 percent of their patients from the host hospital." Id. Both reports roused concerns for AHCA. First, if appropriate LTCH patients cannot be identified and other types of services overlap appropriately with LTCH services, AHCA cannot produce a valid needs assessment methodology. The second produces another concern. In the words of Mr. Gregg, The problem ... with oversupply of long-term care hospital beds is that it creates an incentive for providers to seek patient who are less appropriate for the service. What we know now is that only the sickest patient ... with the most severe conditions are truly appropriate for long-term care hospital placement. * * * ... [T]he MedPAC report most recently shows us that the greatest indicator of utilization of long-term care hospital services is the mere availability of those services. Tr. 368-369. The MedPAC reports, themselves, although marked for identification, were not admitted into evidence. Objections to their admission (in particular, Kindred's) were sustained because they had not been listed by AHCA on the stipulation required by the Pre-hearing Order of Instructions.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be issued by the Agency for Health Care Administration that: approves Select-Palm Beach's application, CON 9661; and approves Kindred's application CON 9662 with the condition that financing of the project be provided by Kindred Healthcare. DONE AND ENTERED this 18th day of April, 2005, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of April, 2005.
The Issue The issues in these cases are whether Certificate of Need (CON) Application No. 10432 filed by East Florida-DMC, Inc. (DMC), to build an 80-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, or CON Application No. 10433 filed by The Public Health Trust of Miami-Dade County, Florida d/b/a Jackson Hospital West (JW), to build a 100-bed acute care hospital in Miami-Dade County, Florida, AHCA District 11, on balance, satisfy the applicable criteria; and, if so, whether either or both should be approved.
Findings Of Fact Based upon the parties’ stipulations, the demeanor and credibility of the witnesses, other evidence presented at the final hearing, and on the entire record of this proceeding, the following Findings of Fact are made: The Parties The Public Health Trust of Miami-Dade County d/b/a Jackson Hospital West and Jackson Health System (JHS) JHS is a taxpayer-funded health system located in and owned by Miami-Dade County. It is governed by The Public Health Trust of Miami Dade-County, Florida (PHT), a seven-member board. JHS owns and operates three acute care hospitals in Miami-Dade County--Jackson Memorial Hospital (JMH); Jackson North Medical Center (JN); and Jackson South Medical Center (JS)--as well as three specialty hospitals: Holtz Children’s Hospital (Holtz); Jackson Rehabilitation Hospital; and Jackson Behavioral Health Hospital. JHS also owns and operates numerous other non- hospital healthcare facilities within Miami-Dade County. JHS’s applicant in this proceeding is JW which, if approved, will be another acute care hospital in JHS. JHS is an academic teaching institution, and the University of Miami (UM) is JHS’s affiliated medical school. Over 1,000 UM residents staff JMH pursuant to an operating agreement with JHS. JN and JS are not academic medical centers. JHS annually receives sales tax and ad valorem tax revenues from Miami-Dade County in order to help fund its operations. JS and JN are community hospitals operated as part of JHS. JS was acquired in 2001. JS is licensed for 226 beds and is also home to a verified Level II trauma center. The JN facility was acquired by JHS in 2006. The facility is licensed for 382 beds. East Florida (DMC) DMC is an affiliate of HCA Healthcare, Inc. (HCA), the largest provider of acute care hospital services in the world. DMC will operate within HCA’s East Florida Division (EFD), which is comprised of 15 hospitals, 12 surgery centers, two diagnostic imaging centers, four freestanding emergency departments, nine behavioral health facilities, and one regional laboratory, along with other related services. There are three HCA-affiliated hospitals in Miami-Dade County: KRMC; Aventura Hospital and Medical Center (Aventura); and Mercy Hospital, a campus of Plantation General Hospital (Mercy). Kendall Regional (KRMC) KRMC, which is located at the intersection of the Florida Turnpike and Southwest 40th Street in Miami-Dade County, is a 417-bed tertiary provider comprised of 380 acute care beds, 23 inpatient adult psychiatric beds, eight Level II neonatal intensive care unit (NICU) beds, and five Level III NICU beds. It is a Baker Act receiving facility. KRMC is a verified Level I trauma center. It also has a burn program. KRMC is also an academic teaching facility, receiving freestanding institutional accreditation from the Accrediting Council for Graduate Medical Education (ACGME) in 2013. KRMC currently has six residency programs including, among others, surgery, internal medicine, podiatry, anesthesia, and surgical critical care. Its teaching programs are affiliated with the University of South Florida, Nova Southeastern University, and Florida International University. KRMC also participates in scholarly and clinical research. In 2017, KRMC had over 82,000 Emergency Department (ED) visits. It treated over 115,000 total inpatients and outpatients that year. There are 850 physicians on KRMC’s medical staff. It offers a full range of medical surgery services, interventional procedures, obstetrics (OB), pediatric, and neonatal care, among many other service lines. KRMC primarily serves southern and western portions of Miami-Dade County but also receives referrals from the Florida Keys up through Broward County, Palm Beach County, and the Treasure Coast. Its main competitors include, but are not limited to: Baptist Hospital; Baptist West; South Miami Hospital; PGH; Hialeah; CGH; JS, and Palm Springs General Hospital. The Tenet Hospitals PGH, Hialeah, and CGH are wholly-owned subsidiaries of Tenet South Florida. These are all for-profit hospitals. PGH is a 368-bed tertiary facility that opened in the early 1970s. It has 297 licensed acute care beds, 48 adult psychiatric beds, 52 ICU beds, and 15 Level II NICU beds. It is located at the Palmetto Expressway and Northwest 122nd Street in Hialeah, Florida. The hospital employs about 1,700 people and has over 600 physicians on its medical staff. PGH is a tertiary-level facility offering a variety of specialty services, including adult open heart surgery, a comprehensive stroke center, and robotic surgery. It has inpatient mental health beds and serves the community as a Baker Act receiving facility. It also offers OB and Level II NICU services with approximately 1,500 births a year. It has approximately 70,000 ED visits and between 17,000 and 18,000 inpatient admissions per year. In addition to its licensed inpatient beds, PGH operates 31 observation beds. PGH is ACGME accredited and serves a significant teaching function in the community. It has approximately 89 residents and fellows. The hospital provides fellowships in cardiology, critical care and interventional cardiology, and also has rotations in neurology and gastroenterology. Residents from Larkin General Hospital also rotate through PGH. PGH generally serves the communities of Opa Locka, Hialeah, Miami Lakes, Hialeah Gardens, Doral, and Miami Springs. In reality, all of the hospitals in the county are competitors, but more direct competition comes from Palm Springs Hospital, Memorial in Miramar, Mount Sinai, Kendall, and even its sister hospital, Hialeah. Hialeah first opened in 1951 and is a 378-bed acute care facility. It has 356 acute care beds, 12 adult psychiatric beds, and 10 Level II NICU beds. The ED has 25 beds and about 40,000 visits per year. It has approximately 14,000 inpatient admissions and 1,400 babies delivered annually. It offers services including cardiac, stroke, robotic surgery, colorectal surgery, and OB services. The hospital has a Level II NICU with 12 beds. CGH is located in the City of Coral Gables and is near the border between Coral Gables and the City of Miami on Douglas Road. It first opened in 1926. Portions of the original structure are still in use. CGH has 245 licensed beds, over 725 employees, 367 physicians, and over 100 additional allied providers on its medical staff. The hospital has a full-service ED. Its service lines include general surgery, geriatrics, urology, treatment of cardiovascular and pulmonary disease, and others. The hospital has eight operating rooms and offers robotic surgery. The ED has 28 beds divided into the main area and a geriatric emergency room. It had about 25,000 ED visits last year, which is lower than prior years, due in part to the presence of over a dozen nearby urgent care centers. CGH has over 8,500 inpatient admissions per year and is not at capacity. While patient days have grown slightly, the average occupancy is still just a little over 40%, meaning, on average, it has over 140 empty inpatient beds on any given day. The hospital is licensed for 245 beds, but typically there are only 180 beds immediately available for use. Agency for Healthcare Administration (AHCA) AHCA is the state health-planning agency charged with administration of the CON program as set forth in sections 408.31-408.0455, Florida Statutes. The Proposals Doral Medical Center (DMC) DMC proposes to build an 80-bed community hospital situated within the residential district of Doral. The hospital will be located in southwestern Doral in zip code 33126 and will serve the growing population of Doral, along with residential areas to the north and south of Doral. The hospital will be located in the City of Doral’s residential district on Northwest 41st Street between Northwest 109th Avenue to the east, and Northwest 112th Avenue to the west. Doral has seen significant growth in the past 15 years and has been consistently included on the list of the fastest growing cities in Florida. The new facility will have a bed complement of 80 licensed acute care beds, including 72 medical/surgical and eight OB beds. The proposed acute care hospital will be fully accredited by the Joint Commission for the Accreditation of Healthcare Facilities and licensed by the State of Florida. No public funds will be utilized in construction of the hospital and it will contribute to the state, county, and municipal tax base as a proprietary corporation. DMC will offer a full range of non-tertiary services, including emergency services, imaging, surgery, intensive care, cardiac catheterization, and women's services, including an OB unit, and pediatric care. DMC will be a general medical facility that will include a general medical component and a surgery component. Although DMC will operate an OB unit, NICU services will not be offered at DMC. If DMC’s patients need more advanced services, including NICU, the EFD hopes they will receive them from KRMC. The open medical staff will be largely community-based, but University of Miami physicians would be welcome at DMC. Before the hospital is built, KRMC will construct and operate a freestanding emergency department (FSED) at the location that will eventually become the ED of DMC. Construction of the FSED is now underway, and Brandon Haushalter, chief executive officer (CEO) of KRMC, estimated that it will open in March or April of 2019. Jackson West JHS proposes to build a community hospital to be known as “Jackson West” near the eastern edge of Doral. The proposed 100-bed general acute care hospital would have medical surgical and obstetrical beds and offer basic acute care services. JHS is a public health system owned by Miami-Dade County. All of JHS’s assets, as well as its debts, belong to the county. JHS is a not-for-profit entity, and therefore does not pay taxes, though it receives hundreds of millions of dollars from property taxes and sales taxes in Miami-Dade County. JHS’s main campus is a large health campus located near the Midtown Miami area in between Allapattah (to the north) and Little Havana (to the south). In addition to JMH, the campus includes Holtz Children’s Hospital, a behavioral health hospital, an inpatient rehabilitation hospital, and several specialty clinics. Bascom-Palmer Eye Institute, a Veterans Administration hospital, and University of Miami Hospital are also located adjacent to Jackson West’s main campus. JMH is a 1,500-bed hospital with a wide array of programs and services, including tertiary and quaternary care, and a Level I trauma program, the Ryder Trauma Center. JMH receives patients from throughout Miami-Dade County, elsewhere in Florida, and internationally. JMH is a teaching hospital and has a large number of residents, as well as professors from the University of Miami, on staff. UM and JMH have had a relationship for many years, and in addition to research and teaching, UM provides physician staffing to JMH. JN is a 342-bed community hospital located in between Miami Gardens and North Miami Beach, just off of I-95 and the Turnpike. JS is a 252-bed community hospital located in the Palmetto Bay area just south of Kendall. It has stroke certification and interventional cardiology, and was recently approved for a trauma program, which began in May 2016. Both JN and JS were existing hospitals that were acquired by JHS. JHS has never built a hospital from the ground up. In 2014, JHS leadership directed its internal planning team to review the healthcare needs of county residents. JHS’s analysis identified a need for outpatient services in western Miami-Dade, the only remaining quadrant of the county in which JHS did not have a hospital or healthcare program at the time. As part of its due diligence, JHS then consulted healthcare firm Kurt Salmon & Associates (KSA) to independently evaluate the data. KSA’s investigation validated a need in the west county for adult and pediatric outpatient services, including need for an FSED. This prompted JHS to explore opportunities for expansion of outpatient services where needed: in the western corridor of Miami-Dade. This was also the genesis of JHS’s long-range plan to first build an FSED in the Doral area, to be followed ultimately by the addition of a general acute care hospital at the site. The JW site is a 27-acre parcel of land located just west of the Palmetto Expressway and north of 25th Street. The site is in an industrial area only a short distance from the western end of the runways at Miami International Airport. The site is located in zip code 33122, which is very sparsely populated. JW proposed a primary service area (PSA) consisting of zip codes 33126, 33144, 33166, 33172/33122, 33174, 33178, and 33182, and a secondary service area (SSA) of zip codes 33155, 33165, 33175, and 33184. JW intends to serve general, acute care non-tertiary patients and OB patients. Detailed below, trends in the JW service area do not demonstrate need for its proposed hospital. The location of the JW site will not contribute to the viability of the proposed hospital. According to 2010 census data, only 328 people live within a one-mile radius of the JW site. Since 2000, only 32 total people have moved into that same area around the JW site--an average of three per year. There are virtually no residences within a one-mile radius of the JW site. From 2000 to 2010, the population within a two- mile radius of the JW site decreased by a rate of 9.4%. The JW health planner projects JW’s home zip code of 33122 will have a total population of only eight (8) people in 2022. From 2012 to 2014, the use rate in the JW service area for non-tertiary patients decreased by 3.9%. That decline continued at a steeper pace of 4.2% from 2014 to 2017. This was largely due to the 65+ age cohort, the demographic of patients that utilize inpatient services the most. The 65+ age cohort is growing at a slower pace in the JW service area than in Miami- Dade or Florida as a whole. Non-tertiary discharges in the JW service area are declining at a greater pace than that of Miami- Dade County--negative 4.2% compared to negative 1.9%. The rate of projected population growth in the JW PSA is decreasing. The projected rate of growth for the JW service area is lower than that of Miami-Dade County and Florida as a whole. The OB patient base JW intends to rely on is projected to remain flat. The inpatient discharges for all ages in the JW service area have declined from 2014 to 2017. For ages 0-17, discharges in the JW service area declined 21.4% during that time period. The discharges for ages 18-44 declined by 4.8%, and the discharges for ages 45-64 declined by 8.9%. The discharges for the important 65+ age cohort declined by 0.1%. Specifically, the discharges for ages 65-74 declined by 6.5%, and the discharges for ages 75-84 declined by 3.3%. The discharges for ages 85+ are the only age cohort that has not declined from 2012 to 2017. Overall, the non-tertiary discharges per 1,000 population (i.e., use rate) for all ages in the JW service area declined from 2012 to 2014 by 6%, and from 2014 to 2017 by 7.8%. Despite these declines in discharges in the JW service area, the health planners who crafted the JW projections used a constant use rate for the 0-17, 18-44, and 45-64 age cohorts. The JW health planners used a declining use rate for the 65+ age cohort. These use rates were applied uniformly across all zip codes, despite wide variance in actual use rates in each zip code. Applying the zip code specific use rates in conjunction with the other assumptions used by the JW health planner demonstrates that the JW projections are unreasonable. For instance, JW’s reliance on a uniform use rate over-projects the number of discharges in JW PSA zip code 33178 by nearly 1,000 patients. This occurs because the population is only growing at a 2% rate in the zip code, but JW’s reliance on service area-wide projections cause the discharges to grow at an extraordinary rate of 8.9% per year. Applying actual use rates across all zip codes causes a drastic change in the JW PSA and SSA definition. Section 408.037(2) requires a CON applicant to identify its PSA and SSA by listing zip codes in which it will receive discharges in descending order, beginning with the zip code with the highest amount of discharges, then proceeding in diminishing order to the zip code with the lowest amount of discharges. The zip codes, which comprise 75% of discharges, constitute the PSA; and the remaining zip codes, which consist of the remaining 25% of discharges, makes up the SSA. However, JW did not project its utilization in this manner. In its application, JW did not define its service area, PSA, and SSA zip codes in descending order by number or percentage of discharges. When this correct adjustment is made, its PSA consists of zip codes 33126, 33172, 33178, 33174, 33144, and 33165; and its SSA consists of zip codes 33175, 33166, 33155, 33182, and 33184. Zip codes 33166 and 33182 were in the original JW PSA, and zip code 33165 was in the original JW SSA. As such, JW’s home zip code should actually be in its SSA. JW health planners call this illogical, but it demonstrates that the JW site is located within a zip code that has almost no population of potential patients. JHS is developing an FSED and outpatient/ambulatory facilities on the JW site regardless of whether its CON application for a hospital is approved. Construction has begun on the JW site, and JHS is actually building a “shelled in” structure intended to house a future hospital, notwithstanding lack of CON approval for the hospital. There is no contingency plan for use of the shelled-in hospital space if CON approval is not obtained. JHS executives unequivocally stated that they intend to continue pursuing CON approval for the JW hospital, even if the proposed DMC hospital is approved. Indeed, JHS has filed third and fourth CON applications for its proposed JW hospital. The budget for the JW campus is $252 million. Sixty to $70 million is being funded from a bond issuance approved by voters in Miami-Dade County. Notably, the bond referendum approved by voters made no mention of a new hospital. The remaining $180 to $190 million is being funded by JHS, which has chosen to only keep 50 days cash-on-hand, and put any surplus toward capital projects. This is well below the number of days cash-on-hand ws advisable for a system like JHS. The specific programs and services to be offered at JW have not been finalized, but it is clear that JW will be a small community hospital that will not offer anything unique or different from any of the existing hospitals in the area, nor will it operate NICU beds. Patients presenting to JW in need of specialized or tertiary services will need to be transferred to another hospital with the capability of serving them, most likely JMH. The Applicants’ Arguments Doral Medical Center (DMC) DMC’s arguments in support of its proposed hospital may be summarized as follows: Geographic features surrounding Doral create transportation access barriers for the residents of the area; Doral is a densely-populated community that is growing quickly and lacks a readily accessible hospital; KRMC, which is the provider of choice for Doral residents, is a growing tertiary facility that cannot sufficiently expand to meet its future demands. DMC will serve much of the same patient population currently served by KRMC and help decompress KRMC’s acute care load so KRMC can focus on its tertiary service lines; From a geographic standpoint, the Doral community and its patients are isolated from much of Miami-Dade County to the north, west, and east, and the nearest hospitals. East Florida-DMC is a subsidiary of HCA and would be a part of the HCA EFD. Michael Joseph is the president of the EFD, which includes 15 hospitals and other facilities from Miami north through the Treasure Coast. Mr. Joseph authorized the filing of the DMC CON application, which proposes an 80-bed basic acute care hospital that includes 72 medical surgical and eight OB beds. As noted, there will be neither unique services at DMC nor any tertiary services, such as a NICU. HCA anticipates that DMC patients needing tertiary services would be referred and treated at KRMC. The proposed hospital would be built on 41st Street, between Northwest 109th Avenue and Northwest 112th Avenue. This site is located on the western edge of Doral, just east of the Everglades. When the consultants were retained to write the first DMC CON application, HCA had already made the decision to go forward with the project. Mr. Joseph described Miami-Dade County as one of the most competitive markets in the country for hospital services. There is robust competition in the Miami-Dade market from the standpoints of payors, physicians, and the many hospitals located in the county, including Jackson, HCA, Tenet, Baptist and others. HCA is not proposing this project because any of the existing hospitals in the area do not provide good quality care. HCA is currently building an FSED on the DMC site that will open regardless of whether the DMC hospital is approved. Mr. Joseph acknowledged that there is a trend toward outpatient rather than inpatient care. Inpatient occupancy of acute care hospitals in Miami-Dade County has been declining in recent years. Managed care has added further pressure on reducing inpatient admissions. Surgical advances have also resulted in fewer inpatient admissions. Surgeries that formerly required an inpatient stay are now often done on an outpatient basis. Mr. Joseph agreed that 30 minutes is a reasonable travel time to access an acute care hospital. The home zip code for the proposed DMC hospital is 33178. KRMC’s market share for that zip code is 20%. Individuals in that zip code are currently accessing a wide variety of hospitals. PGH is only 6.7 miles away and has the fourth highest market share in that zip code. HCA’s healthcare planning expert, Dan Sullivan, acknowledged that, if approved, DMC would likely have an adverse financial impact on KRMC and other area hospitals. Several witnesses testified that the travel time from the DMC site to KRMC is about 10 minutes, and that an ambulance could do it in as little as five minutes. As to the argument that the residents of Doral face geographic access barriers, the evidence did not indicate that there is anything unique about Doral from a traffic standpoint compared to other parts of Miami-Dade County. People come in and out of Doral on a daily basis in significant numbers for work and other reasons via various access points. Witnesses agreed that 25 to 30 minutes is a reasonable drive time for non-tertiary acute care services, and the evidence showed that residents of Doral, and the DMC service area, are well within 30 minutes of multiple hospitals providing more intensive services than are proposed by DMC. Indeed, many residents of DMC’s service area are closer to other hospitals than to the DMC site. None of the DMC witnesses were able to identify any patient in Doral who had been unable to access acute care services, or had suffered a bad outcome because of travel from Doral to an area hospital. The evidence did not establish that there currently exists either geographic or financial access barriers within the service area proposed to be served by DMC. Jackson West As in its Batch One application, JW advances six arguments as to why its proposed hospital should be approved. They are: It will serve a significant amount of indigent and Medicaid patients. JHS already serves residents of the proposed service area, which JW characterizes as “fragmented,” in that residents go to a number of different hospitals to receive services. Development of the freestanding ED and ambulatory center is under way. JW would provide an additional opportunity to partner with UM and FIU. There is physician and community support for the project. JW will add to the financial viability of JHS and its ability to continue its mission. JW presented very little analysis of the types of factors typically considered in evaluating need for a new hospital. JW did not discuss existing providers and their programs and services, the utilization of existing hospitals, and whether they have excess capacity, or other important considerations. Instead, JW advanced the six arguments noted above, for approval of its proposed hospital, none of which truly relate to the issue of need. First, JW states that its proposed hospital will serve a significant level of Medicaid and indigent patients. While it is true that JHS serves a significant amount of Medicaid and indigent patients, there are a number of reasons why this is not a basis to approve its proposed hospital. As an initial matter, JW treads a fine line in touting its service to Medicaid and indigent patients, while also targeting Doral for its better payer mix and financial benefit to JHS. JHS also receives an enormous amount of tax dollars to provide care to indigent and underserved patients. While other hospitals in Miami-Dade County provide care to such patients, they do not receive taxpayer dollars, as does JHS, although they pay taxes, unlike JHS. Also, Medicaid is a good payer for JHS. With its substantial supplement, JHS actually makes money from Medicaid patients, and it costs the system more for a Medicaid patient to be treated at a JHS hospital than elsewhere. More significantly, there is not a large Medicaid or indigent population in Doral, nor evidence of financial access issues in Doral. Second, JW argues that its CON application should be approved because JHS already serves patients from the Doral area, which JW characterizes as “fragmented” because area residents go to several different hospitals for care. This so- called “fragmentation” is not unique to Doral, and is not unusual in a densely-populated urban market with several existing hospitals. The same phenomenon occurs in other areas of Miami-Dade County, some of which actually have a hospital in the localized area. The fact that Doral residents are accessing several different hospitals demonstrates that there are a number of existing providers that are accessible to them. As discussed in greater detail below, residents of the Doral area have choices in every direction (other than to the west, which is the Everglades). JHS itself already serves patients from the Doral area. If anything, this tells us that patients from Doral currently have access to the JHS hospitals. Third, JW argues that its CON application should be approved because development of the JW campus is under way. This is irrelevant to the determination of need, and is simply a statement of JHS’s intent to build an FSED and outpatient facilities on a piece of land that was acquired for that purpose, regardless of CON approval. Fourth, JW argues for approval of its proposed hospital because it would provide an additional opportunity to partner with UM and Florida International University (FIU). However, the statutory criteria no longer addresses research and teaching concerns, and JHS’s relationship with UM or FIU has no bearing on whether there is a need for a new hospital in the Doral area. Moreover, JW did not present any evidence of how it would partner with UM or FIU at JW, and there does not seem to be any set plans in this regard. Fifth, JW claims that there is physician and community support for its proposed hospital, but it is very common for CON applicants to obtain letters in support for applications. Indeed, the DMC application was also accompanied by letters of support. Sixth and finally, JW argues that its proposed hospital will add to the financial viability of HSA and allow it to continue its mission. However, JW provided no analysis of the projected financial performance of its proposed hospital to substantiate this. The only financial analysis in the record is from KSA, a consulting firm that JHS hired to analyze the programs and services to be developed at JW. The KSA analysis posits that the JW FSED project will lose millions of dollars and not achieve break-even unless there is an inpatient hospital co-located there so that JW can take advantage of the more lucrative hospital-based billing and reimbursement. The sixth “need” argument relates to the issue of JHS’s historical financial struggles, which bear discussion. Only a handful of years ago, the entire JHS was in dire financial trouble, so much so that selling all or parts of it was considered. Days cash-on-hand was in the single digits, and JHS fell out of compliance with bond covenants. JHS’s financial difficulties prompted the appointment of an outside monitor to oversee JHS’s finances. Price Waterhouse served in that role, and made several recommendations for JHS to improve its revenue cycle, make accounting adjustments, and improve its staffing and efficiency. As a result of these recommendations, JHS went through a large reduction in force, and began to more closely screen the income and residency of its patients. As a result of these measures, overall financial performance has since improved. Despite its improved financial position, JHS still consistently loses money on operations, including a $362,000,915 loss as of June 30, 2018. JHS clearly depends upon the hundreds of millions of non-operating tax-based revenues it receives annually. JHS’s CEO expressed concerns over decreases in the system’s non-operating revenue sources, and claimed that JHS needs to find ways to increase its operating revenue to offset this. JW is being proposed as part of this strategy. However, JHS’s chief financial officer testified that “the non-operating revenues are a fairly stable source of income.” In fact, JHS’s tax revenues have gone up in the last few years. JHS sees the more affluent Doral area as a source of better paying patients that will enhance the profitability of its new hospital. Beyond this aspiration however, there is no meaningful analysis of the anticipated financial performance of its proposed hospital. This is a glaring omission given that a significant impetus for spending millions of public dollars on a new hospital is to improve JHS’s overall financial position. The KSA analysis referenced above determined that changes to the Hospital Outpatient Prospective Payment System rule would result in the JW campus losing hundreds of millions of dollars and never reaching “break even,” absent an inpatient hospital on the campus for “hospital based” billing and reimbursement. Though a financial benefit to the system, the increased reimbursement JHS would receive by having an inpatient hospital on the JW campus would be a financial burden on the healthcare delivery system since it would cost more for the same patient to receive the same outpatient services in a hospital- based facility. Reports by KSA also state that a strategic purpose of JW is to attract patients that would otherwise go to nearby facilities like PGH and Hialeah, and to capture tertiary or higher complexity cases which would then be sent to JMH. JW’s witnesses and healthcare planning experts fully expect this to happen. In 2015, and again in 2017, JHS conducted a “Community Health Needs Assessment,” which is required by law to be performed by public safety net hospitals. The assessments were conducted by gathering responses to various questions from a wide array of community leaders and stakeholders, including the CEOs of JHS’s hospitals, about the healthcare needs of the community. The final Community Health Needs Assessment documents are lengthy and cover a variety of health-related topics, but most notable for this case is that: (1) nowhere in either the 2015 or 2017 assessment is the development of a new hospital recommended; and (2) expansion into western Miami-Dade County scored by far the lowest on a list of priorities for JHS. In its application and at hearing, JW took the position that JW can enter the Doral area market without impacting existing providers to any meaningful extent. While JW acknowledges that its proposed hospital would impact the Tenet Hospitals, it argues that the impact is not significant. The evidence established that the financial impact to the Tenet Hospitals (calculated based upon lost contribution margin) would total roughly $3 million for lost inpatients, and $5.2 million including lost outpatients. While these losses will not put the Tenet Hospitals in financial peril, they are nonetheless significant and material. The Existing Healthcare Delivery System Miami-Dade County is home to 18 freestanding acute care hospitals, comprising a total of 7,585 licensed and approved acute care beds. With an average annual occupancy of 53.8% in calendar year 2017, there were, on average, approximately 3,500 unoccupied acute care beds in the county on any given day. While the countywide occupancy rate fluctuates from year to year, it has been on a downward trend in the past several years. As pointed out by several witnesses, the lack of a hospital in Doral is not itself an indication of need. In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. The population of Doral currently is only about 59,000 people. It is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. As set forth in JW’s CON application, the better payer mix in Doral was a significant factor behind its decision to file its CON application. Although there is not a hospital within the Doral city limits, there are a number of healthcare providers in Doral and several hospitals nearby. PGH and Palm Springs Hospital are just north of Doral. KRMC is just south of Doral. Hialeah is northeast of Doral. CGH, Westchester General, and NCH are southeast of Doral. JMH and all of its facilities are east of Doral. And there are others within reasonable distance. KRMC is only six miles due south of the proposed DMC site, and PGH is just eight miles north of the DMC site. As to the JW site, PGH is 6.9 miles distant, CGH is 8.6 miles distant, and Hialeah is 7.4 miles distant. Residents of the Doral area have many choices in hospitals with a wide array of services, and they are accessing them. The parties to this case, as well as other existing hospitals, all have a share of the Doral area market. JW calls this “fragmentation” of the market and casts it in a negative light, but the evidence showed this to be a normal phenomenon in an urban area like Miami, with several hospitals in healthy competition with each other. Among the experts testifying at the hearing, it was undisputed that inpatient acute care hospital use rates are on the decline. There are different reasons for this, but it was uniformly recognized that decreasing use rates for inpatient services, and a shift toward outpatient services, are ongoing trends in the market. Recognizing the need for outpatient services in the Doral area, both JW and DMC (or, more accurately, their related entities) have proposed outpatient facilities and services to be located in Doral. Kendall Regional Medical Center KRMC is currently the dominant hospital provider in the Doral area. Regarding his motivation for filing the DMC application, Mr. Joseph readily admitted “it’s as much about protecting what I already currently provide, number one.” KRMC treats Medicaid and indigent patients. KRMC has never turned away a patient because it did not have a contract with a Medicaid-managed care company. The CEO agreed that there is no access problem for Medicaid or charity patients justifying a new hospital. It was argued that KRMC is crowded, and the DMC hospital would help “decompress” KRMC, but the evidence showed that KRMC has a number of licensed beds that are not being used for inpatients. In addition, its ED has never gone on diversion, and no patient has ever been turned away due to the lack of a bed. Moreover, the census at KRMC has been declining. It had 25,324 inpatient admissions in 2015, 24,649 admissions in 2016, and 23,301 in 2017. The most recent data available at the time of hearing reflected that KRMC has been running at a little less than 75% occupancy, before its planned bed additions. KRMC is between an eight to 10 minute drive from Doral, and currently has the largest market share within the applicants’ defined service areas. KRMC is readily available and accessible to the residents of Doral. KRMC currently has a $90 million dollar expansion project under way. It involves adding beds and two new floors to the West Tower--a new fifth floor which will add 24 ICU beds and 24 step-down beds, and a new sixth floor which will house the relocated pediatric unit and 12 new medical-surgical beds. KRMC is also adding a new nine-story, 765 parking space garage and other ancillary space. This expansion will reduce the occupancy rate of KRMC’s inpatient units, and in particular its ICUs. These bed additions, in conjunction with increasing emphasis on outpatient services and the resultant declining inpatient admissions, will alleviate any historical capacity constraints KRMC may have had. There are also a number of ways KRMC could be further expanded in the future if needed. The West Tower is designed so it could accommodate a seventh floor, and the East Tower is also designed so that an additional floor could also be added to it. In addition, KRMC recently completed construction of a new OR area that is built on pillars. The new construction includes a third floor of shelled-in space that could house an additional 12 acute care beds. Moreover, this new OR tower was designed to go up an additional two to three floors beyond the existing shelled-in third floor. It is clear that KRMC has implemented reasonable strategies for addressing any bed capacity issues it may have experienced in the past. Decompression of KRMC is not a reason to approve DMC. Palmetto General Hospital Evidence regarding PGH was provided by its CEO Ana Mederos. Ms. Mederos is a registered nurse and has lived in Miami-Dade County for many years. She has a master of business education from Nova University and has worked in several different hospitals in the county. Specifically, she was the chief operating officer (COO) at Cedars Medical Center, the CEO at North Shore Medical Center, the CEO at Hialeah Hospital, and has been the CEO at PGH since August of 2006. Ms. Mederos is one of the few witnesses that actually lives in Doral. She travels in and out of the area on a daily basis. Her average commute is only about 15 minutes, and she has multiple convenient options in and out of Doral. PGH is located just off the Palmetto Expressway at 68th Street. It opened in the early 1970s and has 368 licensed beds, including 52 ICU beds. The hospital employs about 1,800 people and has over 600 physicians on its medical staff. PGH’s occupancy has declined from 79.8% in 2015 to 64% in 2016, and even further to 56.7% in 2017. There are many reasons for this decline, including pressure from managed care organizations, the continued increase in the use of outpatient procedures, improvements in technology, and increased competition in the Miami-Dade County market. Ms. Mederos expects that inpatient demand will continue to decline into the foreseeable future. PGH recently activated 31 observation beds to help improve throughput and better accommodate the increasing number of observation patients. PGH offers high-quality care and uses various metrics and indicators to measure and monitor what is going on in the hospital. The hospital has also been recognized with numerous awards. Through its parent, Tenet, PGH has contracts with just about every insurance and managed care company that serves the community. The hospital treats Medicaid and indigent patients. PGH’s Medicaid rate of $3,580 per patient is significantly lower than the rate paid to JMH. PGH has an office dedicated to helping patients get qualified for Medicaid or other financial resources, which not only helps the hospital get paid for its services, it also assists patients and families to make sure that they have benefits on an ongoing basis. Roughly 9-10% of PGH’s patients annually are completely unfunded. PGH only transfers patients if there is a need for a service not provided at the hospital, or upon the patient’s request. PGH does not transfer patients just because they cannot pay. PGH pays physicians to take calls in the ED which also obligates those physicians to provide care to patients that are seen at the hospital. PGH is a for-profit hospital that pays income taxes and property taxes, and does not receive any taxpayer subsidies like those received by JHS. Ms. Mederos reviewed the applications of JW and DMC, and articulated a number of reasons why, in her opinion, neither application should be approved. She sees no delays in providing care to anyone in the area, as there are hospitals serving Doral in every direction. There are a multitude of FSEDs available and additional FSEDs are being built in Doral by both applicants. There is another FSED being built close to PGH by Mount Sinai Medical Center. NCH has also opened an FSED that has negatively affected the volume of pediatric patients seen at PGH. There are also multiple urgent care centers. It was Ms. Mederos’ firm belief that persons living in Doral have reasonable geographic access to both inpatient and outpatient medical services. Ms. Mederos’ testimony in this regard is credited. There are no programs or services being proposed by either applicant that are not already available in the area. Ms. Mederos also noted that there is currently no problem with access to OB services in the area. However, she has a particular concern in that both applicants propose to offer OB services, but neither is proposing to offer NICU services. The evidence showed that most all of the hospitals that provide OB services to the Doral area offer at least Level II and some Level III NICU services. Thus, in terms of OB care, both proposed hospitals would be a step below what has developed as the standard of care for OB patients in the county. Ms. Mederos acknowledged that PGH does not have a huge market share in the zip codes that the applicants are proposing to serve, but that does not mean that the impact from either would not be real and significant. If a hospital is built by either applicant, it will need physicians, with some specialists in short supply. There are tremendous shortages in certain medical fields, such as orthopedics and neurology. In addition, there will be additional competition for nurses and other staff, which will increase the cost of healthcare. The loss of $1.3 to $2 million in contribution margin, as projected by Tenet’s healthcare planner, is a negative impact on PGH as hospital margins become thinner, and those numbers do not include costs like those needed to recruit and retain staff. PGH is again experiencing a nursing shortage, and losing nurses, incurring the higher cost for contract labor, paying overtime, and essentially not having the staff to provide the required services is a serious potential adverse impact from either proposed new hospital. JHS also tends to provide more lucrative benefits than PGH, and a nearby JW hospital is a threat in that regard. As a final note, Ms. Mederos stated that her conviction that there is no need for either proposed hospital in Doral is even more resolute than when she testified in the Batch One Case. With continued declines in admissions, length of stay and patient days, the development of more services for the residents of Doral, the shortages of doctors and nurses, the ever increasing role of managed care that depresses the demand for inpatient hospital services and other factors, she persuasively explained why no new hospitals are needed in the Doral area. Coral Gables Hospital (CGH) Maria Cristina Jimenez testified on behalf of CGH, where she has worked in a variety of different capacities since 1985. She was promoted to CEO in March 2017. She has lived in Miami her entire life. Ms. Jimenez has been involved in initiatives to make her hospital more efficient. She is supportive of efforts to reduce inpatient hospitalizations and length of stay, as this is what is best for patients. Overall, the hospital length of stay is dropping, which adds to the decreasing demand for inpatient services. CGH is accredited by the Joint Commission, has received multiple awards, and provides high-quality care to its patients. It also has contracts with a broad array of managed care companies as do the other Tenet hospitals. CGH treats Medicaid patients, and its total Medicaid rate is less than $3,500 per inpatient. The hospital has a program similar to PGH to help patients get qualified for Medicaid and other resources. CGH also provides services to indigent patients, and self-pay/charity is about 6% of the hospital’s total admissions. The hospital does not transfer patients just because they are indigent. Physicians are compensated to provide care in the emergency room and are expected to continue with that care if the patients are admitted to the hospital, even if they do not have financial resources. CGH also pays income and property taxes, but does not receive any taxpayer support. CGH generally serves the Little Havana, Flagami, Miami, and Coral Gables communities, and its service area overlaps with those of the applicants. In order to better serve its patients and to help it compete in the highly competitive Miami-Dade County marketplace, CGH is developing a freestanding ED at the corner of Bird Road and Southwest 87th Avenue, which is scheduled to open in January 2020. This will provide another resource for patients in the proposed service areas. Ms. Jimenez had reviewed the CON applications at issue in this case. She does not believe that either hospital should be approved because it will drain resources from CGH, not only from a financial standpoint, but also physician and nurse staffing. CGH experiences physician shortages. Urologists are in short supply, as are gastrointestinal physicians that perform certain procedures. Hematology, oncology, and endocrinology are also specialty areas with shortages. The addition of another hospital will exacerbate those shortages at CGH. While CGH does not have a large market share in the proposed PSA of either applicant, anticipated impact from approval of either is real and substantial. A contribution margin loss of $1.2 to $2.2 million per year, as projected by Tenet’s healthcare planner, would be significant. The drain on resources, including staff and physicians, is also of significant concern. Hialeah Hospital Dr. Jorge Perez testified on behalf of Hialeah. Dr. Perez is a pathologist and medical director of laboratory at the hospital. More significantly, Dr. Perez has been on the hospital’s staff since 2001 and has served in multiple leadership roles, including chair of the Performance Improvement Council, chief of staff; and since 2015, chair of the Hialeah Hospital Governing Board. Hialeah offers obstetrics services and a Level II NICU with 12 beds. Approximately 1,400 babies a year are born there. Hialeah’s occupancy has been essentially flat for the past three years, at below 40%, and it clearly has ample excess capacity. On an average day, over 200 of Hialeah’s beds are unoccupied. Like other hospitals in the county, Hialeah has a number of competitors. The growth of managed care has affected the demand for inpatient beds and services at Hialeah. Hialeah treats Medicaid and indigent patients. Approximately 15% of Hialeah’s admissions are unfunded. As with its sister Tenet hospitals, Hialeah is a for- profit hospital that pays taxes and does not receive tax dollars for providing care to the indigent. Dr. Perez succinctly and persuasively identified a variety of reasons why no new hospital is needed in Doral. First and foremost, there is plenty of capacity at the existing hospitals in the area, including Hialeah. Second, both inpatient admissions and length of stay continue trending downward. Care continues to shift toward outpatient services, thereby reducing the demand for inpatient care. According to Dr. Perez, if a new hospital is approved in Doral it will bring with it adverse impacts on existing hospitals, including Hialeah. A new hospital in Doral will attract patients, some of which would have otherwise gone to Hialeah. Moreover, Doral has more insured patients, meaning the patients that would be lost would be good payors. There would also be a significant risk of loss of staff to a new hospital. Dr. Perez’s testimony in this regard is credible. Statutory and Rule Review Criteria In 2008, the Florida Legislature streamlined the review criteria applicable for evaluating new hospital applications. Mem’l Healthcare Grp. v. AHCA, Case No. 12- 0429CON, RO at 32 (Fla. DOAH Dec. 7, 2012). The criteria specifically eliminated included quality of care, availability of resources, financial feasibility, and the costs and methods of proposed construction. Lee Mem’l Health System v. AHCA, Case No. 13-2508CON, RO at 135 (Fla. DOAH Mar. 28, 2014). The remaining criteria applicable to new hospital projects are set forth at section 408.035(1), Florida Statutes. Section 408.035(1)(a): The need for the healthcare facilities and health services being proposed. Generally, CON applicants are responsible for demonstrating need for new acute care hospitals, typically in the context of a numeric need methodology adopted by AHCA. However, AHCA has not promulgated a numeric need methodology to calculate need for new hospital facilities. Florida Administrative Code Rule 59C-1.008(2)(e) provides that if no agency need methodology exists, the applicant is responsible for demonstrating need through a needs assessment methodology, which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict, or both; Medical treatment trends; and Market conditions. Both applicants propose to build small community hospitals providing basic acute care and OB services in the Doral area of western Miami-Dade County. Both applicants point to the increasing population and the lack of an acute care hospital in Doral as evidence of need for a hospital. The DMC application focuses largely on geographic access concerns, while the JW application is premised upon six arguments as to why JHS contends its proposed JW hospital should be approved. The lack of a hospital in Doral is not itself an indication of need.3/ In addition, population growth, and the demands of the population for inpatient hospital beds, cannot be considered in a vacuum. Sound healthcare planning requires an analysis of existing area hospitals, including the services they offer and their respective locations; how area residents travel to existing hospitals, and any barriers to access; the utilization of existing hospitals and amount of capacity they have; and other factors which may be relevant in a given case. Doral is in the west/northwest part of Miami-Dade County, in between the Miami International Airport (to the east) and the Everglades (to the west). It is surrounded by major roadways, with US Highway 27/Okeechobee Road running diagonally to the north, US Highway 836/Dolphin Expressway running along its southern edge, US Highway 826/Palmetto Expressway running north-south to the east, and the Florida Turnpike running north- south along the western edge of Doral. To the west of the Turnpike is the Everglades, where there is minimal population and very limited development possible in the future. The City of Doral itself has an area of about 15 square miles, and is only two or three times the size of the Miami International Airport, which sits just east of Doral. Much of Doral is commercial and industrial, with the largest concentration of residential areas being in the northwest part of the city. While there is unquestionably residential growth in Doral, the population of Doral is currently only about 59,000 people. Doral is not as densely populated as many areas of Miami-Dade County, has a number of golf course communities, and is generally a more affluent area with a higher average household income than much of Miami-Dade County. JW proposes to locate its hospital on the eastern side of Doral, just west of Miami International Airport, while the DMC site is on the western side of Doral, just east of the Everglades. JW’s site is located in an industrial area with few residents, while the DMC site is located in an area where future growth is likely to be limited. Both sites have downsides for development of a hospital, with both applicants spending considerable time at hearing pointing out the flaws of each other’s chosen location. Both applicants define their service areas to include the City of Doral, but also areas outside of Doral. Notably, the entire DMC service area is contained within KRMC’s existing service area, with the exception of one small area. While the population of Doral itself is only 59,000 people, there are more concentrated populations in areas outside of Doral (except to the west). However, the people in these areas are closer to existing hospitals like PGH, Hialeah, KRMC, and others. For the population inside Doral, there are several major roadways in and out of Doral, and area residents can access several existing hospitals with plenty of capacity within a 20-minute drive time, many closer than that. It was undisputed that inpatient acute care hospital use rates continue to decline. There are different reasons for this, but it was uniformly recognized that decreasing inpatient use rates, and a shift toward outpatient services, are ongoing trends in the market. These trends existed at the time of the Batch One Case. As observed by Tenet’s healthcare planner at hearing: “The occupancy is lower today than it was two years ago, the use rates are lower, and the actual utilization is lower.” Both applicants failed to establish a compelling case of need. While there is growth in the Doral area, it remains a relatively small population, and there was no evidence of community needs being unmet. Sound healthcare planning, and the statutory criteria, require consideration of existing hospitals, their availability, accessibility, and extent of utilization. These considerations weigh heavily against approval of either CON application, even more so than in the prior case. Section 408.035(1)(b): The availability, accessibility, and extent of utilization of existing healthcare facilities and health services in the service district of the applicant; and Section 408.035(1)(e): The extent to which the proposed services will enhance access to healthcare for residents of the service district. As stated above, there are several existing hospitals in close proximity to Doral. Thus, the question is whether they are accessible and have capacity to serve the needs of patients from the Doral area. The evidence overwhelmingly answers these questions in the affirmative. Geographic access was a focal point of the DMC application, which argued that there are various barriers to access in and around Doral, such as a canal that runs parallel to US Highway 27/Okeechobee Road, train tracks and a rail yard, industrial plants, and the airport. While the presence of these things is undeniable, as is the fact that there is traffic in Miami, based upon the evidence presented, they do not present the barriers that DMC alleges. Rather, the evidence was undisputed that numerous hospitals are accessible within 20 minutes of the proposed hospital sites, and some within 10 to 15 minutes. All of Doral is within 30 minutes of multiple hospitals. These are reasonable travel times and are not indicative of a geographic access problem, regardless of any alleged “barriers.” In addition, existing hospitals clearly have the capacity to serve the Doral community, and they are doing so. Without question, there is excess capacity in the Miami-Dade County market. With approximately 7,500 hospital beds in the county running at an average occupancy just over 50%, there are around 3,500 beds available at any given time. Focusing on the hospitals closest to Doral (those accessible within 20 minutes), there are hundreds of beds that are available and accessible from the proposed service areas of the applicants. KRMC is particularly noteworthy because of its proximity to, and market share in, the Doral area. The most recent utilization and occupancy data for KRMC indicate that it has, on average, 100 vacant beds. This is more than the entire 80-bed hospital proposed in the DMC application (for a service area that is already served and subsumed by KRMC). Moreover, KRMC is expanding, and will soon have even more capacity at its location less than a 10-minute drive from the DMC site. From a programmatic standpoint, neither applicant is proposing any programs or services that are not already available at numerous existing hospitals, and, in fact, both would offer fewer programs and services than other area hospitals. As such, patients in need of tertiary or specialized services will still have to travel to other hospitals like PGH, KRMC, or JMH. Alternatively, if they present to a small hospital in Doral in need of specialized services, they will then have to be transferred to an appropriate hospital that can treat them. The same would be true for babies born at either DMC or JW in need of a NICU. Similarly, there are bypass protocols for EMS to take cardiac, stroke, and trauma patients to the closest hospital equipped to treat them, even if it means bypassing other hospitals not so equipped, like JW and DMC. Less acute patients can be transported to the closest ED. And since both applicants are building FSEDs in Doral, there will be ample access to emergency services for residents of Doral. This criterion does not weigh in favor of approval of either hospital. To the contrary, the evidence overwhelmingly established that existing hospitals are available and accessible to Doral area residents. Section 408.035(1)(e), (g) and (i): The extent to which the proposed services will enhance access to healthcare, the extent to which the proposal will foster competition that promotes quality and cost-effectiveness, and the applicant’s past and proposed provision of healthcare services to Medicaid patients and the medically indigent. It goes without saying that any new hospital is going to enhance access to the people closest to its location; but as explained above, there is no evidence of an access problem, or any pressing need for enhanced access to acute care hospital services. Rather, the evidence showed that Doral area residents are within very reasonable travel times to existing hospitals, most of which have far more extensive programs and services than either applicant is proposing to offer. Indeed, the proposed DMC service area is contained within KRMC’s existing service area, and KRMC is only 10 minutes from the DMC site. Neither applicant would enhance access to tertiary or specialized services, and patients in need of those services will still have to travel to other hospitals, or worse, be transferred after presenting to a Doral hospital with more limited programs and services. Although it was not shown to be an issue, access to emergency services is going to be enhanced by the FSEDs being built by both applicants. Thus, to the extent that a new hospital would enhance access, it would be only for non-emergent patients in need of basic, non-tertiary level care. Existing hospitals are available and easily accessible to these patients. In addition, healthy competition exists between several existing providers serving the Doral area market. That healthy competition would be substantially eroded by approval of the DMC application, as HCA would likely capture a dominant share of the market. While approval of the JW application might not create a dominant market share for one provider, it would certainly not promote cost-effectiveness given the fact that it costs the system more for the same patient to receive services at a JHS hospital than other facilities. Indeed, approval of JW’s application would mean that the JW campus will have the more expensive hospital-based billing rates. Florida Medicaid diagnosis related group (DRG) payment comparisons among hospitals are relevant because both DMC and JW propose that at least 22% of their patients will be Medicaid patients. Data from the 2017-18 DRG calculator provided by the Medicaid program office was used to compare JHS to the three Tenet hospitals, KRMC, and Aventura Hospital, another EFD hospital in Miami-Dade County. The data shows that JHS receives the highest Medicaid rate enhancement per discharge for the same Medicaid patients ($2,820.06) among these six hospitals in the county. KRMC receives a modest enhancement of $147.27. Comparison of Medicaid Managed Care Reimbursement over the period of fiscal years 2014-2016 show that JHS receives substantially more Medicaid reimbursement per adjusted patient day than any of the hospitals in this proceeding, with the other hospitals receiving between one-third and one-half of JHS reimbursement. In contrast, among all of these hospitals, KRMC had the lowest rate for each of the three years covered by the data, which means KRMC (and by extension DMC) would cost the Medicaid program substantially less money for care of Medicaid patients. Under the new prospective payment system instituted by the State of Florida for Medicaid reimbursement of acute care hospital providers, for service between July 1, 2018, and March 31, 2019, JHS is the beneficiary of an automatic rate enhancement of more than $8 million. In contrast, KRMC’s rate enhancement is only between $16,000 and $17,000. Thus, it will cost the Medicaid program substantially more to treat a patient using the same services at JW than at DMC. Furthermore, rather than enhance the financial viability of the JHS system, the evidence indicates that the JW proposal will be a financial drain on the JHS system. Finally, JHS’s past and proposed provision of care to Medicaid and indigent patients is noteworthy, but not a reason to approve its proposed hospital. JW is proposing this hospital to penetrate a more affluent market, not an indigent or underserved area, and it proposes to provide Medicaid and indigent care at a level that is consistent with the existing hospitals. JHS also receives the highest Low Income Pool (LIP) payments per charity care of any system in the state, and is one of only a handful of hospital systems that made money after receipt of the LIP payments. HCA-affiliated hospitals, by comparison, incur the second greatest cost in the state for charity care taking LIP payments into consideration. Analysis of standardized net revenues per adjusted admission (NRAA) among Miami-Dade County acute care hospitals, a group of 16 hospitals, shows JHS to be either the second or the third highest hospital in terms of NRAA. KRMC, in contrast, part of the EFD/HCA hospitals, is about 3% below the average of the 16 hospitals for NRAA. DMC’s analysis of standardized NRAA using data from 2014, 2015, and 2016, among acute care hospitals receiving local government tax revenues, shows JHS receives more net revenue than any of the other hospitals in this grouping. Using data from FY 2014 to FY 2016, DMC compared hospital costs among the four existing providers that are parties to this proceeding and JMH as a representative of JHS. Standardizing for case mix, fiscal year end, and location, an analysis of costs per adjusted admission shows that the hospitals other than JMH have an average cost of between a half and a third of JMH’s average cost. The same type of analysis of costs among a peer group of eight statutory teaching hospitals shows JHS’s costs to be the highest. It should also be noted that if JW were to fail or experience significant losses from operations, the taxpayers of Miami-Dade County will be at risk. In contrast, if DMC were to fail financially, EFD/HCA will shoulder the losses. When the two applications are evaluated in the context of the above criteria, the greater weight of the evidence does not mitigate in favor of approval of either. However, should AHCA decide to approve one of the applicants in its final order, preference should be given to DMC because of its lower costs per admission for all categories of payors, and in particular, the lower cost to the Florida Medicaid Program. In addition, the risk of financial failure would fall upon EFD/HCA, rather than the taxpayers of Miami-Dade County. Rule 59C-1.008(2)(e): Need considerations. Many of the considerations enumerated in rule 59C- 1.008(2)(e) overlap with the statutory criteria, but there are certain notable trends and market conditions that warrant mention. Specifically, while the population of Doral is growing, it remains relatively small, and does not itself justify a new hospital. And while there are some more densely populated areas outside of the city of Doral, they are much closer to existing hospitals having robust services and excess capacity. Doral is a more affluent area, and there was no evidence of any financial or cultural access issues supporting approval of either CON application. The availability, utilization, and quality of existing hospitals are clearly not issues, as there are several existing hospitals with plenty of capacity accessible to Doral area residents. In terms of medical treatment trends, it was undisputed that use rates for inpatient hospital services continue trending downward, and that trend is expected to continue. Concomitantly, there is a marked shift toward outpatient services in Miami-Dade County and elsewhere. Finally, both applicants are proposing to provide OB services without a NICU, which is below the standard in the market. While not required for the provision of obstetrics, NICU backup is clearly the most desirable and best practice. For the foregoing reasons, the considerations in rule 59C-1.008(2)(e) do not weigh in favor of approval of either hospital.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Healthcare Administration enter a final order denying East Florida-DMC, Inc.’s CON Application No. 10432 and denying The Public Health Trust of Miami-Dade County, Florida, d/b/a Jackson Hospital West’s CON Application No. 10433. DONE AND ENTERED this 30th day of April, 2019, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of April, 2019.
Conclusions Having reviewed the administrative complaint dated July 16, 2008, attached hereto and incorporated herein (Ex. 1), and all other matters of record, the Agency for Health Care Administration ("Agency") has entered into a Settlement Agreement (Ex. 2) with the other party to these proceedings, and being otherwise well-advised in the premises, finds and concludes as follows: ORDERED: The. att ached Settlement Agreement is approved and adopted as part of this Final Order, and the parties are directed to comply with the terms of the Settlement Agreement. Filed June 30, 2009 1:59 PM Division of Administrative Hearings. Respondent shall pay an administrative fine in the amount of One Thousand Dollars ($1000.00). The administrative fine is due and payable within thirty (30) days of the date of rendition of this Order. Checks should be made payable to the "Agency for Health Care Administration." The check, along with a reference to these case numbers, should be sent directly to: Agency for Health Care Administration Office of Finance and Accounting Revenue Management Unit 2727 Mahan Drive, MS# 14 Tallahassee, Florida 32308 Unpaid amounts pursuant to this Order will be subject to statutory interest and may be collected by all methods legally available. Respondent's petition for formal administrative proceedings is hereby dismissed. Each party shall bear its own costs and attorney's fees. The above-styled case is hereby closed. DONE and ORDERED this du, day of- =---' 2009, in Tallahassee, Leon County, Florida. Holly Ben on, Secretary Agency fo Health Care Administration A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF AHCA, AND A SECOND COPY, ALONG WITH FILING FEE AS PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW OF PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA APPELLATE RULES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED. Copies furnished to: David C. Ashburn Attorney for the Respondent Greenberg Traurig, P.A. 101 East College Avenue Tallahassee, Florida 32302 (U. S. Mail) Mary Daley Jacobs Assistant General Counsel Agency for Health Care Administration 2295 Victoria Avenue, Room 346C Fort Myers, Florida 33901 (Interoffice Mail) Finance & Accounting Agency for Health Care Admin. Revenue Management Unit 2727 Mahan Drive, MS #14 Tallahassee, Florida 32308 (Interoffice Mail) Daniel Manry Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (U.S. Mail) Jan Mills Agency for Health Care Administration 2727 Mahan Drive, Bldg #3, MS #3 Tallahassee, Florida 32308 (Interoffice Mail) CERTIFICATE OF SERVICE I HEREBY CERTIFY that a true and correct copy of this Final Order was served on the above-named person(s) and entities by U.S. Mail, or the <?s = method designated, on this the Z f C J , 2009. Richard Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building #3 Tallahassee, Florida 32308-5403 (850) 922-5873 STATE OF FLORIDA
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: East Pasco Medical Center (EPMC) is a non-profit 85-bed acute care hospital facility located in the East Pasco subdistrict of HRS District V. There are only two hospitals in the subdistrict -- EPMC in Zephyrhills and Humana in Dade City, which is approximately ten miles north. Humana is a 120- bed acute care hospital facility. Both facilities offer the same services and share the same medical staff. On or about September 17, 1987, EPMC submitted an application for a Certificate of Need to add 35 medical/surgical beds via a fourth floor addition to its existing facility. Its existing 85 beds are located in private rooms, and it is proposed that the additional 35 beds will also be placed in separate rooms. The application submitted to the Department of Health and Rehabilitative Services (HRS) projected a total project cost of $4,531,000. This figure was revised at the hearing to a project cost of $2,302,900. With regard to acute care services, the State Health Plan seeks to assure geographic accessibility. All residents of East Pasco County currently have access to acute care hospital services within the travel times suggested by the State plan. The State Health Plan also seeks to promote the efficient utilization of acute care services by attaining an average annual occupancy rate of at least 80 percent. The District V Local Health Plan emphasizes that additions to inpatient acute care beds in a subdistrict should not be considered unless a numeric bed need is shown and certain occupancy thresholds have been met. The recommended occupancy thresholds for medical/surgical beds are 80% for the subdistrict and 90% for the facility seeking to add beds. Application of the bed need methodology contained in HRS's Rule 10- 5.011(1)(m), Florida Administrative Code, indicates a numeric need for 57 additional acute care medical/surgical beds in the East Pasco subdistrict for the planning horizon period of July, 1992. The rule provides that HRS will "not normally approve" additional beds unless average occupancy in the subdistrict is greater than 75 percent. However, the rule permits HRS to award additional beds when there is a calculated need, notwithstanding low occupancy in the subdistrict, if the applicant had a minimum of 75% average occupancy during the 12 months ending 14 months prior to the Letter of Intent. Rule 10- 5.011(1)(m)7.e., Florida Administrative Code. The rule also permits HRS to award additional beds where the calculated numeric need substantially exceeds the number of existing and approved beds in the subdistrict and there is an access problem related to travel time. For the relevant time period, the acute care occupancy rate for the East Pasco subdistrict was below 75% percent. Indeed, over the past few years, the average occupancy rate in that subdistrict has been 54 to 58 percent. Humana only operates at about a 55% occupancy. The East Pasco subdistrict does experience seasonal fluctuations in medical/surgical occupancy, with the season for high occupancy beginning in late October and ending in mid- to late April. In addition to tourists, it is expected that the revival of the citrus industry in East Pasco County will bring more migrant pickers to the area during the peak season months. The seasonal increase in occupancy directly corresponds with a large increase in seasonal population, particularly in the Zephyrhills area. The Zephyrhills area population is much older than the Dade City population and is also much older than the State average. The HRS acute care bed need rule includes considerations of seasonal peak demands. When considering both hospitals in the subdistrict, there has been a decline in peak seasonal occupancy rates over the past few years. While the population of the East Pasco subdistrict has grown, and is expected to increase by approximately 7,200 in 1992, there is a trend of declining utilization in the subdistrict. This decline is due to increased used of outpatient services and shorter lengths of hospital stay attributable to the current reimbursement system. The medical/surgical use rate fell from 454 patient days per 1,000 population in 1986 to 414 patient days per 1,000 population in 1988. There was a similar decline in the acute care use rate. Assuming a constant medical/surgical use rate, the projected demand for 1992 would be 2,980 additional medical/surgical patient days in the subdistrict according to population projections, and about 4,267 incremental patient days according to local health council projections. EPMC's Letter of Intent to add 35 additional beds was filed in mid- July, 1987. Its acute care occupancy rate for the period of April, 1986 through March, 1987 was 75.3 percent. Occupancy at EPMC from May, 1986 to April, 1987 was 73.6%; occupancy from June, 1986 through May, 1987 was 73%; and occupancy from July, 1986 to June, 1987 was 72.2 percent. EPMC does experience periods of high occupancy during the peak season months. High occupancy levels have a greater impact upon smaller hospitals due to their lesser degree of flexibility. On occasion, during the winter months, EPNC is required to refuse admittance to patients due to crowded conditions within its facility. Patients are sometimes transferred or referred to other facilities, including Humana, although the necessity for such transfers or referrals is occasionally due to a lack of intensive or critical care beds as opposed to a lack of medical/surgical beds. During the periods of time when EPMC had high occupancy levels, beds were available at Humana. EPMC's current payor mix includes a high level of Medicare (over 60%), and it is committed, through both its Christian mission and an agreement with the County, to treat indigent and Medicaid patients. The actual amount of indigent or charity care provided by EPNC was not established. In any event, EPMC desires to increase its bed size in order to help maintain a proper payor mix at the hospital so as to ensure the financial survival of the hospital. It is felt that a greater number of beds, given the rise in population, and particularly elderly population, would allow EPNC to serve a greater number of private and/or third party insurance paying patients. While the evidence demonstrates that EPMC may operate with a less favorable payor mix than Humana, the evidence was not sufficient to demonstrate that EPMC will suffer financial ruin without additional beds. Likewise, it was not established that the patients which EPNC must turn away in the winter months are consistently paying patients. Increasing the number of beds at EPNC to 120 beds does not necessarily mean that its profitability would be improved. Volume and payor mix are the most critical factors in determining whether a hospital will be profitable. There is currently a nursing shortage throughout the nation. Rural areas, such as the eastern portion of Pasco County, experience even greater difficulty in attracting nursing personnel to the area. Due to the shortage of nurses, as well as the seasonal demand, EPMC is required to use contract care nurses throughout the year. While it would prefer to employ its own nursing staff, EPMC will use contract staff due to the seasonal variations in its nursing requirements. The use of contract or registry nurses costs 50% to 60% more on a daily basis; however, lower occupancy during the off-peak months does not justify year- round employment for as large an in-house nursing staff. For its proposed 35 beds, EPMC projects nurse manpower requirements as follows: 1 nurse manager, 4.2 R.N. charge nurses, 15.1 R.N. staff and 14.1 L.P.N. staff, for a total of 34.4 full time equivalent nursing positions. The recruiting efforts of EPNC to fill these positions will include advertising, visiting nursing schools and colleges, utilizing student nurses at the hospital and use of the Adventist Health System international network. Humana currently has 15 vacancies, or 12 to 13% of its nursing staff. Humana's nursing salaries have increased 20% over the past eighteen months. As noted above, EPNC and Humana compete for the same nursing personnel. Humana's personnel director believes that if EPNC increases its nursing staff by 34 FTEs, Humana's nursing staff will be approached to fill those positions. As a consequence, Humana will experience additional nursing shortages and will be required to further increase salaries. It is proposed that the project cost of adding 35 beds to EPMC will be financed with 100% debt financing through a bond issue. The financing will be part of a much larger bond issuance intended to finance several other projects within the Adventist hospital system. No evidence was adduced that such a bond issuance had been prepared or approved, and there was no evidence concerning the other projects which would be financed in conjunction with this project. In 1987, EPNC was carrying about five million dollars of negative equity. The hospital is currently greater than 100% financed. As noted above, the original Certificate of Need application filed with HRS listed the total project cost to be $4,531,000. In its response to omissions, EPMC stated that the construction cost would be $175 per square foot. In the updates submitted at the hearing, EPNC proposed a project cost of $2,302,900, which included a construction cost of $85 per square foot. A more reasonable cost for the addition of a floor to an existing facility would be $125 per square foot, plus an inflation factor of 6% and architectural and engineering fees of 6 to 7%. The proposed equipment list submitted by EPNC fails to include major equipment items such as an overhead paging system, a nurse call system, examination room equipment, medication distribution equipment, bed curtains, shower curtains, patient and staff support lounge items, and IV pumps. EPNC's updated equipment cost budget fails to include tax, freight, contingency and installation costs. The projected equipment costs should be tripled to adequately and reasonably equip a 35-bed nursing unit. The projected utilization and pro formas submitted by EPMC are not reasonable and were not supported by competent substantial evidence. EPMC's projected utilization for the proposed 35-bed unit is 8,950 patient days in the first year of operation and 9,580 in the second year of operation. Applying the current use rate to the population projections submitted by EPMC's expert in demographics and population projections produces only about 2,980 additional patient days in the year 1992. Given the fact that EPMC's current market share is approximately 54%, there is no reason to believe that Humana would not absorb at least some of those projected additional patient days. There are many months of the year in which additional patient days could be filled within the existing complement of 85 beds at EPNC. Depending upon the ultimate cost of the project, the break even point for financial feasibility purposes would be approximately 3,500 to 4,000 patient days. The concept behind a pro forma is to develop a financial picture of what operations will be in the first two years of operation. EPMC stated its revenues and expenses in terms of 1988 dollars and used its current revenue- to-expense ratios for projecting operations four years into the future. This is improper because gross revenues are going up, reimbursement is not increasing as rapidly and expenses, particularly salaries and insurance, are increasing. In addition, EPMC's projected 1992 salaries in several categories were less than they are currently paying for such positions. EPMC currently provides good quality of care to its patients. The only future concern in this realm is the fact that in the winter months, its intensive and critical care unit beds are often full and there is no room for additional patients. Additional medical/surgical volume from the proposed 35- bed unit would lead to additional intensive and critical care bed demand.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the application of East Pasco Medical Center for a Certificate of Need to add 35 acute care beds to its existing facility be DENIED. Respectfully submitted and entered this 30 day of March, 1989, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of March, 1989. APPENDIX TO RECOMMENDED ORDER CASE NO. (Case No. 88-1227) The proposed findings of fact submitted by the parties have been carefully considered and are accepted, incorporated and/or summarized in this Recommended Order, with the following exceptions: Petitioner: Third sentence rejected as not established by competent, substantial evidence. Accepted, but not included as irrelevant to the ultimate resolution of the issues. Rejected. The Personnel Director of Humana presented testimony in this proceeding. Accepted as an accurate restatement of testimony, but rejected as an erroneous conclusion of law. 16. Second sentence rejected as an erroneous conclusion of law. A18. Rejected as contrary to the evidence. 20. First sentence rejected as an erroneous conclusion of law. First sentence rejected as an erroneous conclusion of law. Rejected as not supported by competent substantial evidence. 27 and 30. Accepted as an accurate restatement of testimony, but rejected as an erroneous conclusion of law. Rejected as immaterial to the issue of need in the year 1992. First sentence rejected as not established by competent substantial evidence. First and third sentences rejected as not established by competent substantial evidence. 37 and 38. Rejected as not established by competent substantial evidence. 44. Last sentence rejected as unsupported by competent substantial evidence. Accepted only if the factors of volume and payor mix are also considered. Partially rejected as speculative and not supported by competent substantial evidence. All but first two sentences rejected as unsupported by competent substantial evidence and an erroneous conclusion of law. Rejected as unsupported by competent substantial evidence and an erroneous conclusion of law. Last sentence rejected as unsupported by the evidence. Rejected as unsupported by competent substantial evidence. Second sentence rejected as contrary to the greater weight of the evidence. 58. Rejected as irrelevant and immaterial. 60. Rejected as not established by competent substantial evidence. 62 - 67. The actual figures regarding total costs, projected utilization and those figures utilized in the pro formas were not established by competent substantial evidence and, therefore, the findings regarding the financial feasibility of the project are rejected. 71. Rejected as not supported by competent substantial evidence. 74. Rejected as not supported by competent substantial evidence. 77. Rejected as an improper factual finding and contrary to the evidence. 78 and 79. Rejected as contrary to the greater weight of the evidence. First sentence rejected as unsupported by competent substantial evidence. Last sentence rejected as unsupported by the evidence. Rejected as contrary to the evidence. Respondent: 2 and 6. Partially accepted with the additional considerations of the applicant's occupancy levels and geographic accessibility. 9. Rejected as contrary to the evidence. 19(a) Interpretation of rule not sufficiently explicated at hearing. 56 - 58. Actual figures are not established by competent evidence due to the failure to establish with reliability the total costs of the project. Intervenor: Second sentence accepted with the additional considerations of the applicant's occupancy levels and geographic accessibility. Third sentence rejected. Interpretation of rule not sufficiently explicated at hearing. First sentence rejected, but this does not preclude a consideration of such a period. Third sentence rejected as not established by the greater weight of the evidence. 31. Second sentence rejected as speculative. 40 and 41. Accepted as factually correct, but not included due to the showing of unused capacity within the East Pasco subdistrict. 55 and 56. Actual figures are not established by competent evidence due to the failure to establish with reliability the total costs of the project. 63 and 72. Same as above with regard to second sentence. 92. Rejected as an overbroad statement or conclusion. 97. Second sentence rejected as overbroad and not supported by the evidence. COPIES FURNISHED: E.G. Boone and Jeffrey Boone 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 34284 Stephen M. Presnell Macfarlane, Ferguson, Allison & Kelly Post Office Box 82 Tallahassee, Florida 323a2 James C. Hauser Messer, Vickers, Caparello, French & Madsen, P.A. Post Office Box 1876 Tallahassee, Florida 32302 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 John Miller, Esquire General Counsel Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700
The Issue Whether the Agency for Health Care Administration should approve the application of Kindred Hospitals East, LLC, for a Certificate of Need to establish a 60-bed, long- term care hospital ("LTCH") to be located in Brevard County, one of four counties in AHCA District 7.
Findings Of Fact The Parties Kindred Hospitals East, LLC, ("Kindred" or the "Applicant") is a subsidiary of Kindred Healthcare, Inc. ("Kindred Healthcare"). Kindred Healthcare operates 84 LTCHs nationwide, including eight in the State of Florida. Twenty-four of Kindred Healthcare's LTCHs are operated by Kindred Hospitals East, LLC, including the eight in Florida. The Agency is the state agency responsible for the administration of the Certificate of Need program in Florida. See § 408.034(1), Fla. Stat., et seq. Pre-hearing Stipulation The Joint Pre-hearing Stipulation between Kindred Hospitals East, LLC, and Agency for Health Care Administration, filed May 25, 2006, contains the following: E. STATEMENT OF FACTS WHICH AREADMITTED AND WILL REQUIRE NO PROOF The CON application filed by Kindred complies with the application content and review process requirements of Sections 408.037 and 408.039, Florida Statutes (2005), and Rule 59C- 1.008, Florida Administrative Code, and the Agency's review of the application complied with the review process requirements of the above-referenced Statutes and Rule. With respect to compliance with Section 408.035(3), Florida Statutes (2005), it is agreed that Kindred has the ability to provide a quality program based on the descriptions of the program in its CON application and based on the operational facilities of the applicant and/or of the applicant's parent facilities which are JCAHO certified. With respect to compliance with Section 408.035(4), Florida Statutes (2005), it is agreed that Kindred has the ability to provide the necessary resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation. With respect to compliance with Section 408.035(6), Florida Statutes (2005)it is agreed that the project is likely to be financially feasible. The parties agree there are no disputed issues with respect to Kindred's compliance with Section 408.035(8), Florida Statutes (2005), which relates to an applicant's proposed costs and methods of proposed construction for the type of project proposed. The parties agree there are no disputed issues with respect to Kindred's compliance with Section 408.035(9), Florida Statutes (2005), which relates to an applicant's proposed provision of health care services to Medicaid patients and the medically indigent. Section 408.035(10), Florida Statutes (2005), relating to nursing home beds, is not at issue with respect to the review of Kindred's CON application. With respect to compliance with Rule 59C-1.008(1)(a)-(c), Florida Administrative Code, it is agreed that Kindred complied with the letter of intent requirements contained therein. 9. Rules 59C-1.008(1)(d), (e), (h), (i), and (j) are not at issue with respect to the review of Kindred's CON applications. With respect to compliance with Rule 59C-1.008(1)(f), Florida Administrative Code, it is agreed that Kindred complied with the applicable certificate of need application submission requirements contained therein. The need assessment methodology is governed by Rule 59C-1.008(2)(e)2.a.- d., Florida Administrative Code. With respect to Rule 59C-1.008(2), Florida Administrative Code, except as to Rule 59C-1.008(2)(e)2.a-d and (2)(e)3, Florida Administrative Code, it is agreed that this provision is not applicable to this proceeding, as the Agency did not at the time of the review cycle at issue, and currently does not, calculate a fixed need pool for LTCH beds. With respect to compliance with Rule 59C-1.008(3), Florida Administrative Code, it is agreed that Kindred submitted the required filing fees. With respect to compliance with Rule 59C-1.008(4)(a)-(e), Florida Administrative Code, it is agreed that Kindred complied with the certificate of need application requirements contained therein. Rule 59C-1.008(5), Florida Administrative Code, relating to identifiable portions of a project, is not at issue with respect to the review of Kindred's CON applications. In light of the stipulation, the issues remaining generally concern: the need for Kindred's proposed facility (including the reasonableness of Kindred's need methodology and whether its need assessment conforms to AHCA rules), the accessibility of existing LTCH facilities, and the extent to which the proposal will foster competition that fosters cost-effectiveness and quality. Long-Term Care Services The length of stay in the typical acute care hospital (a "short-term hospital" or a "STACH") for most patients is four to five days. Some hospital patients, however, are in need of acute care services on a long-term basis, that is, much longer than the average lengths of stay for most patients in an short-term hospital. Patients appropriate for LTCH services represent a small but discrete sub-set of all inpatients. They are differentiated from other hospital patients. Typically, they have multiple co-morbidities that require concurrent treatment. Patients appropriate for LTCH services tend to be elderly and frail, unless they are victims of severe trauma. All LTCH patients are generally medically complex and frequently catastrophically ill. Generally, Medicare patients admitted to LTCHs have been transferred from short-term hospitals. At the LTCH, they receive a range of services, including cardiac monitoring, ventilator support, and wound care. Existing LTCHs in District 7 At the time of the CON application there were 12 LTCHs operating in Florida with a total licensed bed capacity of 805 beds. There is one existing LTCH within District 7. Another is approved and under construction. Select Specialty Hospital-Orlando, Inc. ("Select-Orlando") contains 35 beds; it was licensed in 2003. The occupancy rate for this facility for CY 2005 was 73.57 percent. Select-Orlando's history shows few discharges to Brevard County. The majority of its discharges are to Orange, Seminole, and Osceola Counties. Most of the balance are to Volusia, Lake, and Polk Counties. A second LTCH, Select Specialty-Orange, Inc., has been approved and is under construction. It will contain 40 beds. The total licensed capacity of these two LTCHs will be 75 beds. Both of the facilities are located in Orange County and are located in or near Orlando within a few miles of each other. The acuity levels of the patients in the existing LTCH are not known. There are no LTCHs in Brevard County where Kindred proposes to build and operate a new LTCH should its application be approved. Kindred's Proposal Kindred's proposal in Brevard County, AHCA District 7, is for a freestanding 60-bed LTCH, with all private rooms, including an 8-bed intensive care unit (ICU). The proposed LTCH will follow a care model template that is similar to Kindred's other LTCHs. It will be a freestanding, licensed, certified and accredited acute-care hospital with an independent self-governed medical staff under the same model as a short-term acute hospital. The majority of patients in an LTCH typically arrive after discharge from a short-term acute care hospital, most often ending their STACH stay in an ICU. Not surprisingly, Kindred projects that its proposed LTCH will receive the bulk of its referrals from STACHs in the surrounding area. Kindred's LTCH patients will be discharged to either their homes, home health care, or to another post-acute provider on the basis of patient needs, family preference, and geography. There are several levels of care provided within an LTCH such as Kindred's proposed facility. Typically, LTCHs accept stable medical patients but with catastrophically ill patients some are bound to become medically unstable. There are eight ICU beds for the medically unstable patient. Thus, Kindred's patients who undergo changes of condition (such as becoming medically unstable) can be cared for without a transfer, unlike in skilled nursing facilities or comprehensive medical rehabilitation hospitals facilities not suited for the medically unstable patient. The goal of an LTCH is to take acute care hospital patients and provide them with a higher level of medical rehabilitation than they would receive in an STACH, and rehabilitate them so that they can be transferred home, or to a rehab hospital, or to a nursing facility. The "medical rehabilitation" of an LTCH addresses system failures and dependence on machines. This is different from the rehabilitation that takes place in an inpatient or outpatient rehab center, where patients usually have suffered an injury or trauma to a muscular or bone system, and their care is based on physical medicine rather than internal medicine. The Orlando Metropolitan Area and Brevard County In evaluating markets that may need an LTCH, Kindred looks at established metropolitan areas the boundaries of which are determined on the basis of population concentrations and commuting data. District 7 contains most of the metropolitan area associated with the city of Orlando (the "Orlando Metropolitan Area"). Like District 7, the Orlando Metropolitan Area has a presence in four counties. But the counties are different. The Orlando Metropolitan Area encompasses all or part of Orange, Osceola, Seminole, (shared with AHCA District 7) and a county that is not in District 7: Lake County. In addition to the three counties it shares with the Orlando Metropolitan Area, District 7 includes Brevard County. At hearing, Mr. Wurdock explained the following about the Orlando Metropolitan Area: When we talk about the Orlando area, we are not just talking about Orange County. Orange County, Osceola County, and Seminole County are all part of the Orlando metro area. That means they're an integrated economic unit based on commuting patterns. Lake County is also part of [the Orlando metropolitan area.] . . . [W]hen we looked at . . . Orange, Osceola and Seminole and ran an analysis . . ., we found . . . there was a need for approximately 180 more beds beyond the . . . 35 that currently existed. So even after you take out the 40 under construction, there is still a really huge need [in the Orlando metropolitan area.] Tr. 56-57. That Brevard County is not part of the Orlando Metropolitan Area is a consideration in this case. Kindred's evaluation also showed two other factors about Brevard County that distinguish it from the Orlando Metropolitan Area. First, it does not have adequate access to long-term care hospitals. Second, it's population with a significant number of seniors and a high number of discharges from STACHs makes it one of the few markets of its size that does not have at least one LTCH. As Mr. Wurdock continued at hearing: Brevard County has a population of more than a million people and it's got more than 100,000 seniors and they have six short term hospitals that produce more than 60,000 discharges a year. . . . [T]here are very few markets of that size in this country that do not have at least one long term hospital . . . Tr. 57. These two factors led Kindred to pursue the application that is the subject of this proceeding. Kindred's decision to pursue a CON for an LTCH in District 7 also stemmed from the interest of Brevard County physicians who had referred patients to Kindred facilities in Fort Lauderdale and Green Cove Springs in Duval County, a government unit consolidated with the city of Jacksonville. This interest was also supported by evidence that showed a predominate north/south referral pattern along the I-95 corridor. Patients in Brevard County STACHs appropriate for LTCH services are referred to facilities in Duval County (north) and Fort Lauderdale (south), but generally not to the lone District 7 LTCH in Orlando. The number of short-term acute hospitals in an area affects the decision of whether to locate a facility in a particular market. The presence of STACHs in a market is significant because the vast majority of an LTCH's patients are transfers from STACHs. The growing senior population (persons aged 65 and over) in Brevard County was also a factor; the elderly population is a large constituent of an LTCH's patient base. Dr. Richard Baney, who practices with Melbourne Internal Medicine Associates, the largest physician- practice group in Brevard County, holds privileges at Holmes Regional Medical Center, and is familiar with the various health care facilities of all types in Brevard County, including hospitals, inpatient rehabilitation hospitals, and nursing homes. Dr. Baney anticipates serving as either an attending or consulting physician if the Kindred facility in Brevard is approved, as do several of the other physicians in his group, including some "intensivists" such as pulmonologists, critical-care physicians, and cardiologists. Dr. Baney's physician group consists of 45 primary care physicians, including internists, family practitioners and pediatricians. The group also includes OB/GYNs, neurologists, medical sub-specialists such as cardiologists, pulmonologists, endocrinologists, hematologists, and oncologists. Among the oncologists are radiological oncologists. There are general surgeons in the group, surgery sub-specialists, including vascular surgeons, and ENT (ear, nose, and throat) physicians. Dr. Baney summed up his opinion on the need for an LTCH in Brevard County as follows: In our area we have excellent acute- care hospitals, and we have a good network located throughout the area of subacute rehab facilities, as well as nursing homes, and then home care, and then eventually a patient is home. What we don't have in this area is a long-term acute-care facility that would handle the more significantly ill patients who need more intensive medical and nursing and physical therapy support. Right now those patients that would normally benefit from this type of facility have to dwell in the hospital for . . . weeks and weeks at a time until they achieve a point of stability where they can be moved into a subacute rehab. What this does in turn is clog up the hospital beds, ICU beds in particular, and every year we have at our large acute-care hospitals here at Holmes patients who are being quartered in the . . . auditorium at the hospital, in the hallways of the emergency room, since the hospital gets just overwhelmed with patients and cannot move them out. Certainly I believe a facility in this area would have no trouble being able to fill that need of taking many of these patients who need this kind of care out of the [STACH] into a better, more efficient setting. Also, we don't have any place that's nearby that patients and their families can go for this kind of care. . . . [I]t's really not logistically feasible for patients and their families to go 80, 90 miles away or further to . . . have their care for this type of duration. Kindred No. 7, Deposition of Richard Baney, Jr., M.D., at 10-11. When asked about the difficulty presented by the distance to the LTCHs in Fort Lauderdale and Duval County, Dr. Baney answered with regard to one of his patients that administratively there a few if any problems. The problem is for the family: But the family was very hesitant to allow their father to be transported . . . 150, 180 miles away and be there for weeks or months while they were recovering. They were quite resistant to the idea of him so far away, since the family would have to travel back and forth. Eventually they overcame that and the patient did go . . . to the facility down south. * * * But it was quite a hurdle that we had to get over. Id., p. 16, 17. Aside from the logistical problems faced by the families whose loved one is a potential patient at an LTCH at great distance from home, Dr. Baney's testimony accentuates another factor faced by potential LTCH patient in Brevard County. This is a factor favoring approval of an LTCH application recently recognized by AHCA when it approved Select-Orange, a second LTCH in the Orlando Metropolitan Area dominated by two large hospital organizations. Similar to the Orlando area, Brevard County STACHs, for the most part, belong to one of two hospital organizations predominate in the area. Brevard County's Two Main Hospital Organizations There are two main hospital organizations in Brevard County: the Health First system and the Wuesthoff system. Health First includes Holmes Regional Medical Center; Palm Bay Community Hospital, which is about 90 beds; and Cape Canaveral Hospital, which is also about 90 beds, in the central part of the county. Palm Bay is a large community about 15 miles south of Melbourne. Cape Canaveral is about 20 miles from Melbourne, and Rockledge is about 15 miles from Melbourne. The Wuesthoff system consists of Wuesthoff Rockledge and Wuesthoff Melbourne. Wuesthoff Rockledge is a 267-bed acute care facility with 32 ICU beds, 8 cardiac surgery beds, and an active emergency room that sees about 1,500 visits a month. Wuesthoff Melbourne is a 115-bed facility with a 12-bed ICU and an active ER of around 800 visits a month. Wuesthoff currently refers LTCH patients- primarily long-term ventilator patients-to Kindred's facilities in Fort Lauderdale and near Jacksonville. When Wuesthoff refers a patient to Kindred, it calls Kindred's intake coordinator who journeys to Wuesthoff to review the patient's records, meet with the family, and determine if the patient can be placed. Only if a physician from the LTCH signs an admission order concurring that the patient is clinically appropriate for admission to an LTCH is the patient transferred. Often, however, because the Kindred facilities are so far away, just as Dr. Baney pointed out, the families do not want to move the patient out of Wuesthoff. This resistance continues despite increased education about the benefit of LTCHs to potential LTCH patients. LTCH Education When an LTCH comes into a market, an education process begins. It begins with the physicians, and with the case managers and social workers in the STACH. Kindred educates these professionals about what an LTCH is, what its services are, and where it fits into the continuum of care. Kindred's Admission and Patient Evaluation Processes Kindred does not admit every patient that falls within the diagnoses that might produce LTCH-appropriate patients. Patients are pre-assessed before admission using what is nationally known as Interqual criteria for hospital admissions. That set of criteria is based on severity of the patient's illness and the intensity of services required to treat the patient, and then a review committee at the LTCH makes a clinical determination whether or not the patient is appropriate for LTCH services. The sole way that a patient gets referred to a Kindred Hospital is through a physician order. Before a patient comes to a Kindred Hospital, a physician has determined that to the best of his or her judgment the patient requires continued care at the level of an acute care hospital and that the patient's course of treatment will be prolonged. A physician from a Kindred Hospital must write the admission order, concurring that it is appropriate for that patient to be in an LTCH. Prior to obtaining that physician order, potential candidates for transfer are identified through the STACH case management staff, with the assistance of the LTCH staff. The STACH medical staff, nurses, or other personnel initiate the request for Kindred to visit the patient, interview the family, talk with the STACH attending physician, and make a determination of whether transfer and care at Kindred is clinically appropriate. Kindred gathers information on a potential patient to assist in making the admission determination using individuals in the field known as "clinical liaisons," who are primarily licensed registered nurses. The clinical liaison gathers the information, but does not make the ultimate determination as to whether to admit the patient to a Kindred facility. The ultimate determination for admission is made by the physician who will be seeing the patient at the Kindred facility. In order to comply with Medicare reimbursement requirements, Kindred employs such safeguards to make sure only appropriate patients are admitted. Medicare reviews the patients treated into the hospital, and it can and does reduce payment for "short stay outliers" who do not stay at least five-sixths of the geometric mean of the length of stay (GMLOS) for the patient's diagnosis. Mathematically, however, LTCHs will always have some patients who are short stay outliers. Even if GMLOSs rise as result of the elimination of short stay patients, between 35 and 40 percent of patients will always be "short stay outliers" under CMS's current definition. They will just be hospitalized for a stay that is short relative to a longer length of stay. Kindred LTCHs utilize criteria that assure that patients, once admitted, have sufficient severity of illness and need sufficient intensity of service to continue to warrant acute care. Case managers in LTCHs apply discharge screens to patients as they near completion of their LTCH care plan to help physicians make a judgment of when they are ready to be transferred either home or to a lower level of post-acute care. Kindred's CON application included a utilization review plan, using an example from Kindred Hospital North Florida. Every hospital has a utilization review plan designed to assure that appropriate care is given to patients. It serves an oversight function for medical care, nursing care, medication administration, and any other area where resources are expended on behalf of the patient. A PPS for LTCHs Effective October 1, 2002, the federal Centers for Medicare and Medicaid Services (CMS) established a prospective payment system for LTCHs. Through this system, CMS recognizes the patient population of LTCHs as separate and distinct from the populations treated by providers of short-term acute care or other post short-term acute care providers. Under the system, each patient is assigned an LTCH DRG, indicating that the patient's diagnosis is within a certain Diagnostic Related Group. The LTCH is reimbursed the pre-determined payment rate for that DRG, regardless of the cost of care. The creation of separate DRGs for LTCH patients is the mark of the federal government's recognition of the validity of LTCH services and the distinct place occupied by LTCHs in the continuum of care based on the high level of LTCH patient acuity. Despite this recognition, concerns about the identification of patients that are appropriate for LTCH services have been voiced both at the federal level and at the state level. With the rise in LTCH applications over the last several years, AHCA has been consistent in voicing those concerns, particularly when it comes to LTCH population levels of acuity. Acuity The Agency is not convinced that there is not significant overlap between the LTCH patient population and the population of patients served appropriately in healthcare settings other than LTCHs. The Agency has reached the conclusion that there are options (other than an LTCH in Brevard County) available to patients targeted by Kindred. The options depend on such matters as physician preference and the availability of long-term care hospitals in a given geographic area. Kindred answers the concerns, in part, with evidence that relates to acuity. A "case mix index" for the hospital is a measure of its average resource consumption. Resource consumption can be viewed as a surrogate measure of complexity and severity of illness, so case mix index is often cited as a readily available measure of patient acuity. Using that indicator, the case mix index of Kindred hospitals is high compared to the entire LTCH industry, and is higher than the average case mix index for STACHs. The APR/DRG system is a way to further refine the variation of patients' acuity within a DRG. The system assigns not only a DRG, but a severity of illness on a scale of one (minor severity) to four (extreme severity). Using that tool with the Kindred data base (as well as the federal MedPAR data base) confirms that the distribution of severe and extreme severity of illness is skewed toward LTCH patients, meaning that there are more patients with higher severity of illnesses in LTCHs than in STACHs. As is to be expected, and one would hope if LTCHs are appropriately serving their niche in the continuum of care, this is consistent with the empirical observation that patients in LTCHs, are more sick than those in STACHs. A third measure of patient acuity routinely used in Kindred hospitals is an APACHE score, which is a combination of physiologic derangement and concurrent illnesses. The average Kindred patient has an APACHE score of about 45, whereas the average critical care patient in all STACHs has a score about two-and-a-half points higher. Thus, Kindred's LTCHs treat a severely ill population only a few points, on the APACHE measure, below that of critical care units in STACHs across the country. The Agency does not, by rule or order, define the level of acuity at which LTCH patients should be for admission. Information on acuity level of patients in STACHs is not available through the State's health statistics data base, nor is any information that would allow an LTCH applicant to undertake an acuity analysis of potential patients. AHCA acknowledges that it has no reason to believe that Kindred admits lower-acuity patients with the least need for resources among those in LTCH- appropriate DRGs. Family Hardship In those markets that do not have LTCHs, STACH patients typically have no choice of treatment but to stay in the STACHs, unless they are willing to travel long distances. As Dr. Baney pointed out in his deposition testimony, many patients who could benefit from an LTCH are not inclined to travel long distances. One reason is that the patients' families are not able to commute that distance. If the patient is going to be in an LTCH for weeks or months, it creates a hardship on the family to have their loved one that far away. The family either loses contact with their loved one or they actually have to relocate to where the loved one is and abandon their home temporarily. The need for family presence and involvement is more than just an emotional matter of patient and family preference. Families are involved in the treatment of a patient in a long-term care hospital, not only through their presence in the hospital but also because they will participate in patient care after the patient leaves the LTCH. Families have to learn how to get the patients out of bed, feed them, and possibly suction them. The families would be taught how to care for their family members once they leave the LTCH, by nursing and therapy staff, teaching them exercises for the patient, how to regulate the oxygen, and giving medications. Differences between LTCHs and Other Providers LTCHs and STACHs do not have the same purpose, and the gap is widening between the two. Over the last 20 years, STACHs have evolved into settings that are very good at stabilizing patients, diagnosing their conditions, and developing treatment plans. Most admissions to the medical ward of an STACH come in through the emergency room where patients are so acute, so unstable, that emergency care is required to stabilize the patient. In their role as diagnostic centers, STACHs provide imaging and laboratory services, and then develop a treatment plan based on the diagnostic work-up performed. STACHs have moved away from the function of carrying out a treatment plan. This is borne out by shrinking STACH lengths of stay over the last 20 years, which now average four to six days. As a result, STACHs have limited capability to provide a prolonged treatment plan for patients with multiple co-morbidities. In contrast, LTCHs do not hold themselves out to be diagnostic or stabilization centers. They have developed expertise in caring for the small subset of patients that require a prolonged treatment plan. A multi-disciplinary physician- based care plan is provided in LTCHs that is not provided in STACHs or other post-acute settings. LTCH patients meet hospital level criteria, and if there is no LTCH readily accessible to provide a hospital-level discharge option for these patients, then the STACH has no option but to keep them, and manage their treatment and costs as best they can. LTCHs take care of those patients who need to be in a hospital, but for whom reimbursement is not adequate for STACHs to treat. The reimbursement system is driving this to a great extent, because of the incentives it gives to discharge patients as quickly as possible. Not every STACH patient needs LTCH care; as a rule of thumb, about one percent of all non-obstetric patients are potentially LTCH-appropriate. Ms. Woods, Vice President for Wuesthoff Health System which operates STACHs in Brevard County, testified in deposition that Wuesthoff's ICUs in Wuesthoff hospitals often retain patients who could be placed in an LTCH. As the Wuesthoff ICUs remain full, the ability to move patients through the hospital, from the emergency department through the ICU, is significantly impacted. While long-term care hospitals take a team approach to getting patients weaned from ventilators or getting them to a rehab involvement, an acute care hospital ICU deals more with acute crisis situations, such as an acute MI (myocardial infarction) or an acute blood clot to the lungs, or someone who has acute sepsis or infection. The roles that LTCHs play have a significant impact on acute care hospitals such as Wuesthoff. If an acute care hospital has to maintain a patient for 30 to 60 days on a ventilator in order to get them weaned or to meet their needs, that poses the potential to interfere with the acute care hospital from meeting the needs of the community, such as patients who are coming in the emergency room with acute conditions. Most of the stays in Wuesthoff's ICU beds, for example, are five to seven days; they are trauma patients, surgery patients that need support and critical care, and patients coming in with major infections. When ICU beds are unavailable, these patients are being held in the emergency departments; it stops the patient flow if the beds in a community hospital are taken up from a long-term ventilator patient. SNFs and LTCHs are different both in intent and execution. SNFs are appropriate for patients whose primary needs are nursing, who are stable and unlikely to change, and who do not require very much medical intervention. Conversely, LTCHs, being licensed and accredited as acute care hospitals, are appropriate when daily medical intervention is required. LTCHs are able to respond to changes in conditions and changes in care plans much better than SNFs because LTCHs have access to diagnostics, laboratory, radiology, and pharmacy services. Further, there are no skilled nursing facilities in Brevard County that operate beds for ventilator dependent patients, nor are there hospital-based skilled nursing units ("HBSNUs"). Using Kindred's own nursing data base, which consists of 250 SNFs across the country, and Kindred's LTCH data base, consisting of 75 LTCHs, Kindred has discovered that that overlap in patient condition is very small. Where there is overlap, it tends to be at the ends of care in LTCHs and the beginning of care in SNFs. This progression makes sense, since SNFs are a common discharge destination for LTCH patients. LTCHs and rehab hospitals are also distinctly different. Rehab hospitals are geared for people with primarily neurologic or musculoskeletal orthopedic issues, and are driven with a care model based on physical medicine rather than internal medicine; LTCH care requires the oversight of an internist rather than a physical medicine doctor. While rehab is a concurrent component of LTCH care, the patient in an LTCH cannot tolerate the three hours per day of therapy required for admission to rehab hospitals due to their medical conditions. In fact, a common continuum of care is for an LTCH patient to receive treatment and improve to the point where they can tolerate three hours of rehab and so be transferred to a rehab hospital. There is one acute rehab center in Brevard County, and it does not take ventilator-dependent patients. There are no hospital based skilled nursing units in Brevard County. There are no skilled nursing facilities in Brevard County that can accommodate ventilator-independent patients. Often ventilator-dependent patients also have IV antibiotics and tube feedings, and these are complicated conditions that a nursing home will not treat. LTCH care cannot be provided through home health care, because, by definition, LTCH patients meet criteria for inpatient hospitalization. Home health care is designed for patients who are very stable and have such a limited medical need that it can be administrated by a visiting nurse or by families. This is in sharp contrast to an LTCH patient where many hours a day of nursing, respiratory, and other therapies are required under the direct care of a physician. On the basis of regulation alone, STACHs could provide LTCH care. They generally do not do so because they have evolved into centers of stabilization, diagnosis, and initiating a treatment plan. Case studies bear out that when patients who made very little progress in STACHs are transferred to LTCHs, where the multidisciplinary approach takes over from the diagnostic focus, the patients improve in both medical and physical well-being. Those patients that would normally benefit from an LTCH have to dwell in the hospital for weeks until they achieve a point of stability where they can be moved in to a subacute facility; instead of continuing to move efficiently down the continuum they remain in the "upper end of the stream." This, in turn, may overwhelm the short-term acute care hospital, particularly in its ICU, resulting in patients being quartered in the auditorium at the hospital and in the hallways of the emergency room. The LTCHs available along the east coast of Florida in Fort Lauderdale or Jacksonville are at a distance from Brevard County that is an obstacle to referral of a Brevard County patient. Having a long-term care hospital in Brevard County would enhance the continuum of services available to Brevard County residents. On the other end of the referral process from Dr. Baney is Rita DeArmond, the clinical liaison for Kindred Hospital Fort Lauderdale. Her duties include, "patient evaluations on potential admissions to [Kindred Fort Lauderdale], which also involves meeting with families and educating the families, . . . case managers, . . . physicians and other people in the community about our hospital and long-term acute care hospitals in general." Kindred No. 8, at 5. She serves "Palm Beach County, the area around Lake Okeechobee [Okeechobee and Hendry Counties], Martin County, . . ., St. Lucie County, Indian River County and Brevard County." Id. at 11. In Ms. DeArmond's experience in dealing with potential long-term care hospital patients and their families not in the immediate vicinity of an LTCH, the willingness of those patients to travel great distances is the biggest hurdle for the patients admission to an LTCH. Most of the patients and their spouses are elderly, and they do not tend to travel long distances, or on the interstate. Being faced with traveling hundreds of miles round-trip to visit a loved one is very distressing to most of them. Not only would potential Brevard County LTCH patients be more likely to avail themselves of LTCH services if there were an LTCH in Brevard County but so would patients in other counties. For example, according to Ms. DeArmond, Lawnwood Regional Medical Center in Fort Pierce, a St. Lucie County STACH, and Sebastian River Medical Center, an STACH in Indian River County, would definitely send potential LTCH patients to an LTCH in Brevard County rather than the current closest LTCH, Kindred Fort Lauderdale. Having an LTCH would be a positive impact for other Brevard County STACHs as well. For example, Wuesthoff would not experience the backup in its emergency department and in its ICU beds, especially in the winter time where there is a high census due to more cases of pneumonia in the winter. If a patient who might be clinically appropriate for an LTCH remains in the ICU in an acute care hospital such as Wuesthoff, that patient does not receive the same care that he or she would receive at an LTCH. Acute care hospitals do not provide the medical rehabilitation work that LTCH's do, such as a plan of care just for the rehab of ventilator patients. An acute care hospital can deal with the pneumonia, and can wean the patient, but does not have the same plans or care or the same focus that an LTCH does with those types of patients. If the patient does not go to an LTCH, they will stay in the acute care hospital using the hospital resources. Wuesthoff has had patients there up to 65 days. The hospitals and physicians visited by Kindred- Fort Lauderdale clinical liaison Ms. DeArmond on a regular basis are located in Brevard County in District 7, as well as Indian River and St. Lucie counties. The hospitals within Brevard County that she contacts include Holmes Regional and Wuesthoff Melbourne Hospital; within Indian River County, Indian River Memorial Hospital in Vero Beach and Sebastian River Medical Center, and within St. Lucie County, St. Lucie Medical Center in Port St. Lucie and Lawnwood Hospital in Fort Pierce. In gathering letters of support that were submitted with Kindred's CON application for a long-term care hospital in Brevard County, Ms. DeArmond met with case managers and physicians and informed them of Kindred's intention to apply for a CON to build a hospital in Brevard County. The physicians and case managers who provided letters of support had previously referred patients to Kindred Hospital in Fort Lauderdale, so they were familiar with the services that Kindred can offer in an LTCH. It is reasonable to assume that such physicians and case managers would refer patients to a Kindred LTCH in Brevard County, if approved. MedPAC Concerns In denying Kindred's application, AHCA relied on reports issued to Congress annually by the Medicare Payment Advisory Committee (MedPAC) that discuss the placement of Medicare patients in appropriate post-acute settings. The June 2004 MedPAC report state the following about LTCHs: Using qualitative and quantitative methods, we find that LTCHs' role is to provide post-acute care to a small number of medically complex patients. We also find that the supply of LTCHs is a strong predictor of their use and that acute hospitals and skilled nursing facilities are the principal alternatives to LTCHs. We find that, in general, LTCH patients cost Medicare more than similar patients using alternative settings but that if LTCH care is targeted to patients of the highest severity, the cost is comparable. AHCA Ex. 7, at 121. The June 2004 MedPAC report, therefore, concludes that LTCHs should "be defined by facility and patient criteria that ensure that patients admitted to these facilities are medically complex and have a good chance of improvement." Id. Despite the above language in the June 2004 MedPAC report, discussion in the SAAR of portions of the MedPAC report shows that AHCA may have misread some of the subtleties of the MedPAC findings. The MedPAC report makes statements that LTCHs and SNFs substitute for one another. While there is some gross administrative data to support that hypothesis, that conclusion cannot yet be drawn due to limitations in data and the wide variation of patient conditions that may be represented by a single administrative grouping such as a DRG. An example of patients in different settings who would appear to be similar are those under DRG-475, which means they were on ventilator life support for at least 96 hours. Such patients may be discharged in conditions that vary greatly. These conditions range from an "alert, talking patient, no longer on life support," to a patient who is "not on life support but is making no progress." There is no administrative data that describes patients at the time of their discharge. MedPAC analysis, therefore, lacks the data to determine why some of those patients went to a higher versus a lower level of care. The SAAR also concludes, based on a letter from the MedPAC Chairman, that LTCH patients cost more on average than patients in other settings. This conclusion is based on an analysis that is unable to differentiate patients within a DRG based on their severity at the time of discharge. The limitation in the DRG is that it is designed to describe the patient's need at the time of admission rather than discharge, so the DRG classification alone does not identify whether the patient was healthy or ill at the time of discharge. Furthermore, MedPAC found that patients who tended to be more severe based on DRG assignment tended to be cared for at similar cost between LTCHs and other settings. In fact, for the tracheostomy patient, which is the extreme of severity and complexity, there was evidence of lower cost of care for patients whose case included an LTCH stay. MedPAC Chairman Glenn Hackbaith, in his March 20, 2006 letter, agreed that CMS's proposed change to the short stay outlier policy was "too severe"; that it affects a "substantial percentage of LTCH patients"; and that it would continue to affect a large percentage of admissions "regardless of the admission policies of LTCHs." MedPAC's March 2006 Report to Congress notes that the total Medicare payments to LTCHs nationwide -- $3.3 billion in 2004 -- represented less than one percent of all Medicare spending. Need Analysis in the Absence of an AHCA Need Methodology The Agency does not have a rule that sets out a formula for determining the need for LTCH beds. Accordingly, AHCA does not publish a fixed need pool for LTCH beds. As the parties agree, this case is governed, therefore, by Florida Administrative Code Rule 59C- 1.008(2)(e)2.a-d (the "Needs Assessment Rule"). Application of the Needs Assessment Rule makes Kindred responsible for demonstrating need through a needs assessment methodology that covers specific criteria listed by the rule as detailed below, following the sections of this Order devoted to Kindred's Need Methodology and AHCA's criticisms of it. Kindred's Need Methodology Kindred bases its need methodology (the "Kindred Methodology") in this case on long-stay patients in short- term hospitals. A description of the Kindred Methodology, supported and proved by the testimony of Mr. Wurdock at hearing, appears in Kindred's CON application under a section entitled "Bed Need Analysis," see Exhibit K-1, at 14. It begins with the statement: "Long-term care hospital bed need can be estimated directly based on the acute care discharges and days occurring in the market." Id. There follows a chart that lists the six Brevard County STACHs and shows the number of patient discharges in the six months ending March 2004 and the patient days for the same period. These total 68,710 and 309,704, respectively. To identify the number of patient days appropriate for LTCH care, the Kindred Methodology takes into account patient diagnosis at discharge, patient age and length of stay. Some types of patients (burn patients, obstetric and pediatric patients or behavioral patients) are not appropriate for LTCH admission. Likewise, patients with short-term rehabilitation diagnoses typically are not appropriate for LTCH care. The first step in the Kindred Methodology, therefore, is to identify and omit those diagnoses which represent patients not appropriate for long-term care admission. Those include all DRGs in the Major Diagnostic Categories (MDC) of 13-Female Reproductive System; 14-Pregnancy, Childbirth and Puerperium; 15- Newborns and Other Neonates; 19-Mental Diseases and Disorders; 20-Alcohol and Substance Abuse; 22-Burns; and 23-Factors Influencing Health Status. Two additional groups of DRGs are omitted by the Kindred Methodology: DRGs specific to patients less than 18 years of age and DRGs for organ transplant patients who are usually required to remain in the STACH for specialized care. The end result of the first step in the Kindred Methodology is a list of 387 short-term acute care DRGs ("LTCH Referral DRGs") that represent patients who potentially could be eligible for LTCH admission. The Kindred Methodology's second step is to identify discharges that are assigned to one of the LTCH Referral DRGs and are aged 18 or older and whose length of stay exceeds a threshold number of days. This threshold is described in the application as follows: The length of stay threshold is defined in terms of the national geometric mean length of stay (GeoMean). That statistic is calculated annually by the federal Centers for Medicare and Medicaid Services (CMS) for each DRG. The number of long-term hospital patients and patient days is affected by the timing of the referrals. Referrals usually occur after the patient's length of stay has become longer than average. It is commonly accepted that many patients who stay in the acute care hospital beyond the geometric mean length of stay would be best cared for in a specialized, long- term environment. Therefore, in this analysis it is assumed that referral to Kindred Hospital Brevard will occur five days after a patient has passed their DRG-specific geometric mean length of stay. This allows time for patient assessment and transfer arrangements. Another important factor affecting the potential number of long-term hospital patients and patient days is the length of time a patient stays in the LTCH. In order to qualify for Medicare certification, long-term care hospitals must maintain a minimum average length of stay of twenty-five days or greater among their Medicare patients. Admission criteria, therefore, are used to minimize the number of Medicare patients requiring just a few days of care. To reflect this in the analysis, patients are considered to be LTCH appropriate only if they would have a long-term hospital length of stay of ten days or more. Exhibit K-1, at 16. Discharged patients, therefore are considered appropriate for LTCH care by the Kindred Methodology if they are discharged from a Brevard County STACH, are at least 18 years of age, are assigned to one of the 387 Referral DRGs, and have a hospital length of stay that exceeds the geometric mean by at least 15 days, the sum of a referral period of five days and an LTCH minimum length of stay of ten days. The third step in the Kindred Methodology is to sum the potential LTCH days produced by the appropriate patients. For these patients, potential LTCH days include all days after the "'transfer day' (i.e., all days that exceed the GeoMean + five days)." Id. For the 12-month period ending March 2004, this calculation yielded approximately 18,400 hospital days in the six Brevard County hospitals, for an average daily census (ADC) of 50.4. The fourth step in the Kindred Methodology is to identify the number of patient days that are leaving Brevard County for LTCH care, due to the absence of an LTCH in the county. During the 12-month period ending in March 2004, 41 Brevard County residents were discharged from Kindred Hospital North Florida in Green Cove Springs and Kindred Hospital Fort Lauderdale. Those patients received 2,229 days of LTCH care, equaling an average daily census of 6.1. Adding that to the 50.4 ADC un-served patients in Brevard County, yields a potential LTCH ADC of 56.5. The fifth step is to account for population growth. This is especially important when there is rapid growth in senior population as there is in Brevard County. According to AHCA projections, the population 65 and over will increase 9.2 percent during the next five years, while the total population will increase 10.8 percent. It is appropriate to increase LTCH ADC at least by 9.2 percent during this time period, since the proposed project will not open until 2007 at the earliest, and will not achieve full utilization until at least 2011. This step produces an LTCH ADC of 61.7. The sixth and final step is to calculate LTCH "bed need" by assuming 85 percent occupancy. Dividing the LTCH ADC of 61.7 by 0.85 yields a bed need of 72 LTCH beds. The Kindred Methodology does not account for the five percent or more of referrals that come from sources other than LTCHs such as nursing homes. Nor does it take into account the admissions from Indian River County currently served by Kindred Hospital Fort Lauderdale, some of which are sure to come to the proposed project if approved. AHCA Criticism The methodology is criticized by AHCA on the bases, among others, that it does not account for beds available elsewhere in District 7, and that it determines need solely within Brevard County, a departure from the statutory mandate which requires Agency review of CON applications with regard to "availability, quality of care, accessibility, and extent of utilization of existing health care facilities in the service district of the applicant." § 408.035(2), Fla. Stat. (emphasis supplied). The Agency's argument with regard to the un- utilized beds at the one existing LTCH in District 7, Select-Orlando, is undermined by recent action of the agency in approving a second Select facility in Orange County, a 40-bed freestanding facility: Select Specialty Hospital-Orange, Inc. ("Select-Orange"). The Agency approved the 40-bed Select-Orange facility, not open at the time of hearing, by way of a Settlement Agreement (the "Select-Orange Settlement Agreement") with the applicant. The two parties to the agreement, AHCA and Select-Orange, jointly stated in that document: [T]he Agency, in recognizing that there are two distinct health systems in the Orlando area, believes that this LTCH is needed for the Orlando Regional Healthcare System due to that unique situation . . . Kindred Ex. 4, at 2. The two distinct health systems in the Orlando area are Orlando Regional Healthcare System, Inc., which has a number of STACHs in the Orlando area including Orlando Regional Medical Center (ORMC), a tertiary medical facility with more than 500 beds, and the Adventist Health System, Inc. (Adventist), a hospital organization with a nationwide presence that as of 2002 operated seven acute care campus systems under a single license held by Adventist d/b/a Florida Hospital in the Orlando Metropolitan Area. See Orlando Regional Healthcare System, Inc. vs. AHCA, Case No. 02-0449 (DOAH November 18, 2002), pp. 8-10. The Select-Orange Settlement Agreement was entered in the midst of administrative litigation over AHCA's preliminary agency action with regard to a CON application. The meaning and impact of AHCA's statement quoted above from the Select-Orange Settlement Agreement were not fully elaborated upon at hearing by any direct evidence. Kindred established through the testimony of Mr. Wurdock and through cross-examination of Ms. Rivera that although Select-Orange was originally approved as a "hospital-in- hospital" or "HIH," that Select-Orange obtained a modification of its CON to become a freestanding facility. Had the facility remained an HIH, federal regulations would have limited the percentage of Medicare referrals that could come from its host hospital, ORMC. As a freestanding facility, Select-Orange has no such limitations. It can fill its beds with referrals from ORMC. Whatever the impact of the freestanding nature of Select-Orange, the Agency's recognition of the unique situation in the Orlando area created by two distinct health systems, such that there is support for a new LTCH when the existing LTCH has available beds, gives rise in this case to an inference in Kindred's favor. If two distinct hospital systems in the Orlando area can support the addition of 40 LTCH beds, then it is highly likely that Brevard County can support a 60-bed LTCH. The county is not a part of the Orlando Metropolitan Area. LTCH referral patterns are north-south along the I-95 corridor (not to Select-Orlando). There are geographic and roadway access issues from Brevard County to the Orlando area demonstrated by commuting patterns that exclude Brevard County from the Orlando Metropolitan Area. And most significantly, the methodology reasonably established need for more than 60 beds in Brevard County. The Needs Assessment Rule The need for any health care service or program regulated by CON Law for which AHCA has not provided a specific need methodology by rule is governed by Florida Administrative Code Rule 59C-1.008(2)(e)(the "Need Assessment Rule"), which states in part: . . . If an agency need methodology does not exist for the proposed project: . . . If an agency need methodology does not exist for the proposed project: The Agency will provide to the applicant, if one exists, any policy upon which to determine need for the proposed beds or service. The applicant is not precluded from using other methodologies to compare and contrast with the agency policy. If no agency policy exist, the applicant will be responsible for demonstrating need through a needs assessment methodology which must include, at a minimum, consideration of the following topics, except when they are inconsistent with the applicable statutory and rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; Market conditions; and Competition. The Agency does not publish a fixed need pool for LTCH beds because it does not have a specific need formula or methodology for LTCH beds. The Agency, furthermore, has not provided Kindred with any policy upon which to determine need in this case. Accordingly, Kindred used its own methodology for determining need in Brevard County and elsewhere in the district (the Orlando Metropolitan Area). Finally, since no agency policy exists with regard to an LTCH need methodology, Kindred is required to prove the existence of need for its proposed project on the basis of the five categories of criteria (referred to in the rule as "topics") listed in sub-paragraphs "a. through e.," of paragraph 2., in subsection (2)(e) of the Rule. Population Demographics and Dynamics In assessing an area's population and demographics for the purpose of evaluating LTCH need, special attention is paid to the elderly population because the majority of LTCH patients are Medicare patients. The elderly are also more likely to produce LTCH patients because they are more likely to be medically complex and catastrophically ill with co-morbidities and dependent on medical equipment like ventilators. Brevard County, while home to only an approximate one-quarter of District 7's population, accounts for more than a third of its seniors. While Brevard County's elderly population is experiencing average or slightly below average growth in relation to the rest of the state, there is no question that Brevard County's elderly population is on the increase and reasonably projected to increase in the future. Availability, Utilization, and Quality of Like Services in the District "[B]y definition, putting a long term hospital in Brevard County will increase accessibility [make LTCH services more available] because . . . the people in Brevard County will no longer have to go all the way to Orlando, or Jacksonville, or Ft. Lauderdale for [LTCH] care." Tr. 48. Mr. Wurdock elaborated on the point of district availability at hearing: We did look at the entire district. . . . [T]here [are] only four counties in the district, three of which orbit around the Orlando and then there is the Palm Bay/Melbourne metropolitan area, which is Brevard. And when we looked at the district as a whole, what we discovered was that there is a need really for two new long term hospitals in the district. There is clearly a need for another one in Orlando [beyond the existing Select- Orlando and the approved not yet operating Select-Orange] and there is also a need for one in Brevard County. . . . [You] could build . . . two new long term care hospitals, both of them in Orlando, but that doesn't . . . make . . . sense when you've got a very large concentration of seniors significantly removed from the Orlando area with six short term hospitals in . . . [Brevard C]ounty comprising essentially its own market. So logically, you . . . put one long term hospital in Brevard and then another long term hospital in Orlando. Tr. 48-49. The presence of six STACHs in Brevard County and the large senior population is significant. The closest LTCH is Select-Orlando more than an hour's drive away. The distance to Select-Orlando and Select-Orange's future site from the municipality in which Kindred proposes to site its proposed LTCH, Melbourne, is more than 60 miles, in a direction not favored by Brevard County residents oriented to driving north or south along the I-95 corridor, but not to the west into the Orlando Metropolitan Area. Furthermore, and most significantly, family members rarely fully understand and accept that their catastrophically ill elderly loved one should be shipped 60 miles away when the patient is in a hospital with a good reputation. Their resistance to a referral at such a distance is unlikely to increase utilization at the Orlando area LTCHs no matter how convinced are their physicians and other clinical practitioners that such a move is required for better care. Medical Treatment Trends LTCHs are recognized as a legitimate part of the health care continuum by the federal government and CON approvals of LTCHs in Florida have been on the upswing throughout this decade. At the federal level, in recognition of their treatment of a small but important subset of patients, Medicare has adopted LTCH DRGs, that is, DRGs specific to LTCHs, for reimbursement under Medicare's PPS. At the state level, the Agency recognizes that "[t]he trend is for LTCHs to be increasingly used to meet the needs of patients in other settings who for a variety of reasons are better served in LTCHs." Respondent Agency for Health Care Administration's Proposed Recommended Order, at 15. This recognition is made by AHCA despite MedPAC's concerns, many of which were tempered and adequately addressed by Kindred in this proceeding. Market Conditions At first blush, market conditions might not seem to favor Kindred's application. The occupancy rate in the District indicates that there are available beds. In AHCA's view, the occupancy rate at the one existing LTCH in District 7, the 35-bed Select-Orlando facility, an H-I-H in a converted nursing home at Florida Hospital Orlando, is not optimal. Select-Orlando opened in 2003, only a few years ago, and it is operating at a high occupancy rate that is approaching optimal. Kindred, moreover, did not confine its need case to its Brevard County methodology. It also presented evidence of need in the Orlando Metropolitan Area consisting, in part, of the three other counties in District 7. Competition While the Agency asserts that it did not give competition much weight in this application, AHCA has not taken the position that Kindred's proposed facility would not foster competition. Having an LTCH in Brevard County would foster competition in the traditional sense in that the only LTCHs in the District, one existing and one approved, are those of Select Medical Corporation, Kindred's chief competitor. A Reasonable Methodology for Brevard County In short, Kindred's methodology is reasonable for determining need in Brevard County and it appropriately includes the topics required by the Needs Assessment Rule. The Agency's argument that there is no need for LTCH beds in Brevard County when there are LTCH beds available elsewhere in the district is defeated by its approval of the Select-Orange facility. Whether Kindred's methodology in this case carries the day for Kindred, given the Agency's approach on a district-wide basis to the need for LTCHs, is addressed in the section of this Order devoted to conclusions of law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is recommended that the Agency for Health Care Administration issue CON No. 9835 to Kindred Hospitals East, LLC, for a 60-bed, long-term acute care hospital in AHCA Health Planning Service District 7, to be located in Brevard County. DONE AND ENTERED this 29th day of November, 2006, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 2006. COPIES FURNISHED: Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3116 Tallahassee, Florida 32308 Christa Calamas, General Counsel Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive, Suite 3116 Tallahassee, Florida 32308 Richard Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive Tallahassee, Florida 32308 M. Christopher Bryant, Esquire Oertel, Fernandez, Cole & Bryant, P.A. 301 South Bronough Street Tallahassee, Florida 32302 Sandra E. Allen, Esquire Agency for Health Care Administration Fort Knox Building III, Mail Stop 3 2727 Mahan Drive Tallahassee, Florida 32308
The Issue The issues for consideration are those allegations set forth in an Administrative Complaint brought by the State of Florida Department of Professional Regulation (Department), in which the Respondent, Scarlett Jones, R.N., is accused of various violations of Chapter 464, Florida Statutes. Through Count One it is said that the Respondent transcribed an order for Heparin to be administered to the patient K.W. as 15,000 units when the physician's order quoted the dosage as 5,000 units, and that the patient was given two dosages at 15,000 units as opposed to the required 5,000 units. In an additional accusation against the Respondent, related to patient care, Respondent is said to have failed to indicate in the patient K.W.'s nursing notes, on or about May 16, 1988, that an administration of Aminophylline was to be restarted during the 11:00 p.m. to 7:00 a.m. shift. Further, it is alleged that this substance was not restarted until 8:00 a.m. on the next day as discovered by a subsequent shift employee. As a consequence, Respondent is said to have violated Section 464.018(1) (f), Florida Statutes, related to alleged unprofessional conduct. Count Two to the Administrative Complaint alleges that on or about June 4, 1988, the Respondent who was assigned to care for the patient E.J., was told by a co-worker that the patient had fallen out of bed and soiled himself and that the Respondent failed to respond to the patient's needs after repeated requests. Eventually, it is alleged that the patient's wife assisted him back to bed and the co-worker took care of the patient's hygiene. As a consequence, Respondent is said to have violated Section 464.018(1)(f), Florida Statutes, related to unprofessional conduct and that she violated Section 464.018(1)(j), Florida Statutes, for knowingly violating a rule or order of the Board of Nursing. Finally, the third count of the Administrative Complaint alleges that the Respondent, on or about June 14, 1988, was found asleep while on duty in violation of Section 464.018(1)(f), Florida Statutes, an act of unprofessional conduct, including, but not limited to, the failure to conform to minimum standards of acceptable and prevailing nursing practice. For these alleged violations, the Department seeks to impose disciplinary action which could include revocation or suspension, the imposition of an administrative fine and/or other relief which the Board of Nursing might deem appropriate.
Findings Of Fact During the relevant periods under consideration in this Administrative Complaint the Respondent was licensed by the Department as a registered nurse and subject to the jurisdiction of the Board of Nursing in disciplinary matters. The license number was 1702172. On April 11, 1988, Respondent took employment with Gadsden Memorial Hospital in Gadsden County, Florida, in a position of charge nurse on the Medical-Surgical Pediatrics Unit, also known as "Med-Surg. Ped." That unit provides short term acute care for post-operative patients, acute medical patients, and acute pediatric patients, some of which require 24-hour observation. Response to the needs of the patients is given by three nursing shifts in each day which begins with shifts of 7:00 a.m. to 3:00 p.m., followed by the 3:00 p.m. to 11:00 p.m. and then 11:00 p.m. to 7:00 a.m. on the following morning. Upon hiring, Respondent was assigned to the work the 11:00 p.m. to 7:00 a.m. and was the only registered nurse on duty during that shift. Among the responsibilities of the charge nurse at the time under examination here, was the assessment of patients on the unit as well as an awareness of the abilities of those other employees who were working in this shift. This was in an effort to provide direct supervision of critical care patients and included supervision of activities performed by a Nurse Technician. Respondent was more directly responsible for critical patients. Other duties included making frequent rounds and checking vital signs in an attempt to insure that the patients were stable. Respondent as charge nurse on "Med-Surg. Ped." could not leave the floor without notification of the house supervisor, another registered nurse. This person would replace the Respondent on those occasions where the Respondent would need to vacate the floor. In addition it was expected that the Respondent would notify those personnel who were working with her on the unit, where she intended to go and how long she would be gone. Before departing it was expected that the Respondent would check the stability of patients. physician's Orders were written on March 2D, 1988, in anticipation of the admission of patient K.W. to Gadsden Memorial Hospital to "Med. Surg Ped." The admission was under orders by Dr. Halpren. Among those orders was the prescription of Heparin, 5,000 units, subcutaneously every 12 hours. The Physician's Orders in terms of legibility are not immediately discernible but can be read with a relatively careful observation of the physician's orders. A copy of those may be found at Petitioner's Exhibit No. 5 admitted into evidence. The problem that tends to arise is that on the line which immediately follows the orders related to Heparin 5,000 units, is found the word hysterectomy written in such a fashion that the initial portion of the letter "H" might be seen as being placed on the prior line giving the unit dosage of the Heparin the appearance of being 15,000 units as opposed to 5,000 units. On April 11, 1988, K.W. was admitted to Gadsden Memorial Hospital as anticipated. At the time of admission the Physician's Orders previously described were provided. Surgery was scheduled and the patient file was made on "Med-Surg. Ped." Under the practices within this hospital, the ward clerk was responsible for transcribing physician's orders onto the patient's Medication Administration Record. This was done here by the ward clerk, S. Diggs. This is to be checked for accuracy by the charge nurse, to include Respondent, with the fixing of the signature to this Medication Administration Record verifying the accuracy of the clerk's entries. Respondent initialed the Medication Administration Record for the patient designating that Heparin in the amount of 15,000 units Q-12, meaning to be given every 12 hours was the requirement, and had been administered in that dosage. This may be seen in a copy of the Medication Administration Record which is part of Petitioner's Exhibit No. The patient was to undergo extensive abdominal surgery, to include the possibility of a hysterectomy and the incorrect administration of Heparin might promote problems with bleeding. The incorrect amount of Heparin as a 15,000 unit dosage was given to K.W. on two occasions. Another patient who was admitted to the ward which Respondent was responsible for as charge nurse was the patient A.W. Physician's Orders were written for that patient by Dr. Woodward on May 16, 1988. A copy of the Physician's Orders may be found at Petitioner's Exhibit No. 6 admitted into evidence. Among the substances prescribed was Aminophylline drip 20 milligrams per hour I.V. This patient had been admitted to the pediatric unit with a diagnosis of asthma and prescribed the Aminophylline to aid the patient's breathing. It was expected that patient A.W. was to be administered two dosages of Aminophylline, an intermediate dosage to be given every few hours in a larger quantity, and a continuous drip to run at 20 milligrams per hour. Within Petitioner's Exhibit No. 6 are nursing notes made by Respondent concerning A.W. On May 17, 1988, between the hours of 12:00 a.m. and 2:00 a.m. it is noted that Respondent was having trouble with patient A.W.'s I.V. She states that the I.V. site was assessed and had to be pulled and that she was not able to reinsert due to the uncooperative nature of this child. The I.V. was restarted by the house supervisor nurse. An entry at 6:30 a.m. made by the Respondent describes the I.V. position as acceptable. When the shift changed at 7:00 a.m. the new charge nurse did not find the Aminophylline drip in progress, as called for, and this is noted in a 7:30 a.m. entry made by this registered nurse, Sherry Shiro. Petitioner's Exhibit No. 4 admitted into evidence is a Confidential Incident Report prepared by the Gadsden Memorial Hospital concerning allegations against the Respondent. They have to do with an alleged incident that occurred around 5:00 a.m. and contain the purported observations by Lucinda Mack, a licensed practical nurse on duty at that time, and they were received on June 15, 1988, by Carol Riddle, R.N., Director of Nursing at Gadsden Memorial Hospital, and the person responsible for investigating this matter. The copy of the Confidential Incident Report contained observations about the alleged failure of treatment by the Respondent directed in the matter of the patient E.J. These remarks are hearsay. They do not corroborate competent evidence at hearing concerning any oversight by the Respondent in the treatment of the patient E.J. On or about June 14, 1988, the Director of Nursing, Carol Riddle, called the night supervisor Michelle Warring at 2:00 a.m. to ascertain if the Respondent was on duty. Respondent was working on that date. At 2:15 a.m. Warring advised Riddle that the Respondent could not be found and Riddle went to the hospital at that time. When she arrived at the facility at 3:00 a.m. she went to "Med-Surg. Ped." where she was informed by the communications clerk that Lucinda Mack, LPN, was the only nurse on duty in that unit, and that the clerk did not know where Respondent could be found. Riddle and Warring then looked through the patient rooms in "Med-Surg. Ped." but could not find the Respondent. One and a half hours after commencing the search Riddle located the Respondent in a different wing of the hospital which contains a respiratory therapy manager's office. Respondent was there with her husband asleep, with the door locked and lights off. At that time she was the only registered nurse on duty in "Med-Surg. Ped." which had six patients receiving care on that evening. Respondent was not performing her duties or supervising those other persons who worked with her on the unit. Respondent had been observed asleep at her nurses' station desk on several other occasions by Dale Storey, a registered nurse working at the Gadsden Memorial Hospital. Linda Reed, a nurse technician at Gadsden Memorial Hospital had observed the Respondent asleep on duty. As commented on by nurse Riddle, who is qualified to give expert opinion testimony about the performance of the Respondent in her nursing practice, the conduct set out before in these findings of fact constitutes unprofessional conduct in the practice of nursing, in a situation which the Respondent knew what her duties were as charge nurse and failed to perform them at an adequate level.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That a final order be entered which fines the Respondent in the amount of $1,000 for the violation related to the care of patient K.W. as set out in Count One and for sleeping on duty as set out in Count Three. And, finds that the violation related to patient A.W. as set out in Count One and the violation alleged in Count Two related to the patient E.J. were not proven. DONE and ENTERED this 19 day of April, 1989, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19 day of April, 1989. APPENDIX TO RECOMMENDED ORDER CASE NO. 88-5719 Petitioner's fact finding is subordinate to the finding in the Recommended Order with exception of paragraph 16 which is not relevant and reference within paragraph 34 to the date June 24, 1988, which should have been June 14, 1988. COPIES FURNISHED: Lisa M. Bassett, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750 Scarlett Jones 2636 Mission Road, #138 Tallahassee, Florida 32302 Judy Ritter, Executive Director Florida Board of Nursing 111 East Coastline Drive, Room 504 Jacksonville, Florida 32202 Kenneth E. Easley, Esquire General Counsel Department of professional Regulation 130 North Monroe Street Tallahassee, Florida 32399-0750
The Issue Whether the Department should issue certificate of need number 4502 to construct and operate a fifty-bed long-term psychiatric hospital in Leon County, Florida, to HCAC?
Findings Of Fact HCAC is a corporation formed by Anthony Estevez for the purpose of developing and operating a long-term psychiatric facility in Leon County, Florida. The facility was to be known as HCAC psychiatric Hospital of Leon County. Mr. Estevez owns 100 percent of the stock of HCAC. The Department is the state agency in Florida authorized to issue certificates of need for long-term psychiatric facilities. TMRMC is a general acute care hospital located in Tallahassee, Leon County, Florida. TMRMC operates a free- standing short-term psychiatric facility in a two-story, approximately 45,000 square foot, structure located within a block and a half from the main hospital. TMRMC's psychiatric facility is licensed for sixty beds. At present, forty-five of its beds are actually open, with fifteen beds in each of three units. One unit is available for adult patients (including geriatric patients), one is available for adolescent patients and one is available for an open adult unit. The other fifteen beds are available but are not staffed because of a lack of patients. Apalachee is a private, non-profit corporation. Apalachee provides comprehensive community mental health services to Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties. Apalachee was established consistent with State and federal guidelines to provide a variety of mental health Services. On March 17, 1986, a Letter of Intent was filed with the Department notifying the Department of Mr. Estevez's intent to apply for a certificate of need in the March 16, 1986, batching cycle. This Letter of Intent was filed within the time requirements of Florida law. On April 15, 1986 Estevez filed an application for a certificate of need for a comprehensive, free-standing, ninety-bed long-term psychiatric facility to be located in Leon County, Florida. Leon County is located in the Department's District 2. District 2 is made up of Bay, Calhoun, Franklin, Gadsden, Gulf, Jackson, Jefferson, Holmes, Leon, Liberty, Madison, Taylor, Wakulla and Washington Counties. Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor and Wakulla Counties make up Subdistrict 2B. The other Counties make up Subdistrict 2A. HCAC's application was filed with the Department and the District 2 local health council. In a letter dated May 15, 1987, the Department requested additional information from HCAC. The information requested by the Department was provided by HCAC on or about June 19, 1986 and June 23, 1986. On September 23, 1986, the Department issued a State Agency Action Report partially approving HCAC's certificate of need application. HCAC was notified of the Department's decision and was issued certificate of need #4502 by letter dated September 30, 1986. HCAC had sought approval to construct a ninety-bed facility providing specialty long-term psychiatric services for the chronically mentally disturbed; patients with a ninety-day average length of stay. The facility was to provide care to adolescents, adults and geriatrics. Certificate of need #4502 authorized HCAC to construct a fifty-bed long-term adult, geriatric and adolescent psychiatric hospital in Leon County. The Department approved the facility because of its perception that there is no long-term psychiatric facility serving the geographic area proposed by HCAC to be served. By letter dated November 13, 1987, the Department issued an amended certificate of need #4502 to HCAC restricting the services to be provided to adult and geriatric long-term psychiatric services. HCAC intends on using thirty-six beds for adults and fourteen beds for geriatric patients. HCAC did not contest the Department's reduction in the size of the approved facility or the limitation of the scope of services to adult and geriatric patients. At the formal hearing HCAC presented evidence to Support the approved fifty-bed facility Serving only adults and geriatrics. HCAC has not contested the Department's decision to only partially approve HCAC's application. Supporting documentation took into account the smaller size of the approved facility. No substantial change in the scope or emphasis of the facility was made by HCAC other than the elimination of adolescent Services. HCAC has projected an average occupancy rate of 80 percent for the third year of operation. Because of the failure to prove that there is a need for an additional fifty long-term psychiatric beds for District 2, HCAC has failed to prove that this projection is reasonable. As of the date of the Department's initial decision and at the time of the formal hearing of these cases Rivendell Family Care Center (hereinafter referred to as "Rivendell") an eighty-bed long-term-psychiatric free-standing hospital located in Panama City, Bay County, Florida, had been open for approximately six weeks. Rivendell's occupancy rate at the time of the formal hearing was approximately twenty-four percent. Long-term psychiatric services mean hospital based inpatient services averaging a length of stay of ninety days. Long-term psychiatric services may be provided pursuant to the Department's rules in hospitals holding a general license or in a free-standing facility holding a specialty hospital license. Generally, the chronically mentally ill constitute an under-served group. In order to provide a complete continuum of care for the mentally ill, in-patient hospital treatment, including twenty-four hour medical care and nursing services and intensive resocialization or teaching of resocialization skills, should be provided. The Department has not established a standard method of quantifying need for long-term psychiatric beds in Florida. The Department's approval of the additional long- term psychiatric beds and facility at issue in this proceeding and the Department's and HCAC's position during the formal hearing that there is a need for HCAC's facility was based generally upon their conclusion that there is a "lack of such a facility to serve the geographic area." During the formal hearing, the Department further justified the need for the facility as follows: Basically it was felt that given the geographic distance or distances between this area, the eastern portion of District II, and the closest facilities, meaning licensed hospitals or facilities authorized by a Certificate of Need to offer long-term adult psychiatric services in a Chapter 395 licensed hospital, that there probably should be one here of a minimal size because we were not firm in, or in surety of the number of patients who might need the service in this area. But we thought that there should be at least a minimally sized long-term psychiatric hospital in this area to serve this area. HCAC and the Department failed to prove that there is a need for an additional fifty long-term psychiatric beds in District 2. At best, HCAC and the Department have relied upon speculation and assumptions to support approval of the proposed facility. In order to prove need, the characteristics of the population to be served by a proposed health service should be considered. A determination that there is a need for a health service should be based upon demographic data, including the population in the service area, referral sources and existing services. HCAC and the Department did not present such evidence sufficient enough to Support the additional fifty beds at issue in this proceeding. HCAC did not use any need methodology to quantify the gross need for long-term psychiatric beds in District 2. Nor did HCAC or the Department present sufficient proof concerning existing services, the population to be served, the income or insurance coverage of the Service area population or actual service area referral patterns. In its application. HCAC premised its proposal, in part, on the assumption that "the Leon County area is an undeserved area with residents being referred to facilities long distances away." HCAC exhibit 2. The evidence does not support this assumption. HCAC also premised its proposal upon its conclusion that it would receive patient referrals from existing institutions. The evidence failed to support this conclusion. HCAC also premised its proposal upon the fact that long-term psychiatric services have been designated as a licensure category by the Department. This does not, however, create a presumption that there is a need for such services in a particular area. Based upon the evidence presented at the formal hearing concerning one methodology for quantifying the need for long-term psychiatric beds, there may already be a surplus of long-term psychiatric beds in District 2. Such a surplus of beds may exist whether State hospital beds and ARTS and GRTS program beds are considered. The methodology is based upon national length of stay data for 1980 which was obtained from the National Institute of Mental Health. The methodology did not take into account more current data or Florida specific data. Therefore, use of the methodology did not prove the exact number of long- term psychiatric beds needed for District 2. Although the weight of the evidence concerning the use of the methodology failed to support a finding as to the exact number of long-term psychiatric beds needed in District 2, its use was sufficient to support a finding that there may be a surplus of beds already in existence. The methodology further supports the conclusion that HCAC and the Department have failed to meet their burden of proving that there is a need for the proposed facility. The weight of the evidence failed to prove whether long-term inpatient psychiatric services, other than those provided at State hospitals, are "within a maximum travel time of 2 hours under average travel conditions for at least 90 percent of the service area's [District 2] population." The closest long-term inpatient psychiatric facility [other than a State hospital], Rivendell, is located in Panama City, Bay County, Florida. This facility is located in Subdistrict 2A. There is no facility located in Subdistrict 2B. Rivendell is located on the western edge of Subdistrict 2B, however. The weight of the evidence failed to prove that this facility is not within a maximum travel time of 2 hours under average travel conditions for at least 90 percent of District 2's population. On page seven of the State Agency Action Report approving Rivendell, the Department indicated that "[t]he proposed location insures that 90 percent of the District I and District II population will have access within two hours travel time." This determination was made prior to the initial approval by the Department of HCAC's proposed facility. If the Florida State Hospital at Chattahoochee (hereinafter referred to as "Chattahoochee"), which is located in District 2, is taken into account, long-term psychiatric services are available within a maximum travel time of 2 hours under average travel conditions for a least 90 percent of District 2's population. Chattahoochee provides long-term inpatient psychiatric hospital care to indigent and private pay patients. The quality of cafe at Chattahoochee is good and a full range of therapeutic modalities typically available at other psychiatric hospitals are available. HCAC and the Department have suggested that there is need for the additional fifty beds at is sue in these cases because of their conclusion that 90 percent of the population of District 2 is not within two hours under average travel conditions of long-term psychiatric services. The failure to prove this conclusion further detracts from their position as to the need for the proposed facility. HCAC exhibit 8 is a copy of the goals, objectives and recommended actions contained in the 1985-87 Florida State Health Plan relating to mental health facilities. The evidence in this proceeding failed to support a finding that HCAC's proposed facility will enhance these goals, objectives and recommended actions. Goal 1 of the 1985-87 Florida State Health Plan is to "[e]nsure the availability of mental health and substance abuse services to all Florida residents in a least restrictive setting." Objectives 1.1, 1.2 and 1.4, and the actions recommended to achieve these objectives are not applicable to HCAC's proposed facility. Objective 1.3 provides that additional long-term inpatient psychiatric beds should not be approved in any district which has "an average annual occupancy of at least 80 percent for all existing and approved long-term inpatient psychiatric beds." Goal 2 of the 1985-87 Florida State Health Plan is to "[p]romote the development of a continuum of high quality, cost effective private sector mental health and substance abuse treatment and preventive services." The objectives and recommended actions to achieve this goal are not applicable to HCAC's proposed facility. Goal 3 of the 1985-87 Florida State Health Plan is to "[d]evelope a complete range of essential public mental health services in each HRS district." The objectives and recommended actions to achieve this goal are not applicable to HCAC's proposed facility. The Florida State Plan for Alcohol, Drug Abuse and Mental Health Services does not specifically deal with private long-term psychiatric services. Instead, it relates specifically to treatment in the state mental health treatment facilities. The applicable district mental health plan does not specifically address long-term psychiatric services. The plan does, however, recommend that new facilities should indicate a commitment to serving the medically indigent. HCAC has agreed to provide 5.6 percent of its patient days for indigent care. HCAC's commitment to provide 5.6 percent of its patient days for indigent care is consistent with this objective. Mental Health District Boards have been abolished. The District 2 Alcohol, Drug Abuse and Mental Health Planning Council, however, has published the Alcohol, Drug Abuse, and Mental Health 1986-89 Provisional District Plan. It is acknowledged in this Plan that deinstitutionalization and the provision of the least restrictive means of treatment should be promoted. The use of long- term psychiatric inpatient beds does not promote this philosophy. If a patient is not admitted as part of the 5.6 percent indigent commitment of HCAC and cannot pay the $10,500.00 per month admission charges, HCAC will not admit the patient. Additionally, if a patient is admitted and runs out of funds to pay the daily charges and is not part of the 5.6 percent indigent commitment, the patient will be transferred to another facility. HCAC's facility will be accessible to all residents who can pay for their services or who are part of the 5.6 percent indigent commitment of HCAC. The provision of 5.6 percent indigent care is adequate. HCAC will provide non- discriminatory health care services, to those indigent patients who are covered by HCAC's 5.6 percent commitment. The Counties which make up Subdistrict 2B, other than Leon County, are below the average national and State poverty levels. In most of the Counties, twenty percent of the population have incomes below the poverty level. HCAC has not managed any type of psychiatric hospital and currently has no employees. The proposed facility is to be managed by Flowers Management Corporation (hereinafter referred to as "Flowers"). Flowers is a psychiatric management company that has been in operation since 1984. Mr. Estevez owns fifty-one percent of the stock of Flowers and is the Chairman of the Board. Flowers is operating five Psychiatric/substance abuse facilities: three hospital based and two free-standing pychiatric/chemical dependency facilities. The staff and faculty of Flowers has a strong background in the management of psychiatric facilities. Flowers has no experience in the management of a long-term psychiatric facility. Mr. Nelson Elliot Rodney, Flowers' Regional Vice President, will be ultimately responsible for the management of the proposed facility. The administrator of the facility will report to Mr. Rodney. Mr. Rodney will seek to implement the goals outlined in HCAC's certificate of need application for the proposed facility. Mr. Rodney has not designed a psychiatric hospital. Nor has Mr. Rodney worked at or administered a long- term psychiatric hospital. The overall treatment plan as presented in HCAC's certificate of need application and as presented at the formal hearing lends itself to the development of a good program for long-term psychiatric care. HCAC has associated itself with experts in long-term psychiatric care in order to develop a detailed plan specifically addressing the treatment needs of long-term psychiatric patients. HCAC has the ability to, and will, provide good quality patient care. Apalachee provides certain programs in Subdistrict 2B which provide alternatives to long-term psychiatric hospitalization: the Geriatric Residential Treatment System (hereinafter referred to as "GRTS") and the Adult Residential Treatment System (hereinafter referred to as "ARTS"). Apalachee's GRTS program, which serves Individuals fifty-five years of age and older, contains a residential component with a total capacity of Seventy geriatric beds. A wide variety of services are provided as part of the GRTS program, including day treatment and case management components. When Apalachee's ARTS program is fully implemented there will be a total of one hundred sixty-three beds available for the care on long-term mentally ill adults and geriatrics within Subdistrict 2B. The ARTS program serves adults who are eighteen to fifty-four years of age. Apalachee's GRTS and ARTS programs do not provide the identical services provided in a free-standing long-term psychiatric hospital. The programs do provide some identical or similar services, and, to that extent, the programs complement the continuum of psychiatric care available. To the extent that they provide the same type of services, Apalachee's GRTS and ARTS programs serve as alternatives to HCAC's proposed facility. There is a national shortage of registered nurses. This shortage is particularly acute with regard to psychiatric nurses. TMRMC has a current shortage of three registered psychiatric nurses, three part-time psychiatric registered nurses, seven flex positions for psychiatric nurses, one full- time nurse technician position and one mental health worker. TMRMC has had difficulty, despite adequate efforts to recruit, recruiting for its psychiatric facility since it opened. It has never been fully staffed with psychiatric nurses. There is also a shortage of occupational therapists. TMRMC has had an occupational therapist vacancy for seven months. Mr. Rodney will be responsible for the recruitment of the necessary personnel for the proposed facility. Mr. Rodney indicated that he would utilize recruitment methods similar to those used by TMRMC. Mr. Rodney will also use his experience and contacts in the Dade County, Florida area. HCAC's salary package is reasonable and HCAC will provide adequate in- service training programs. Although HCAC will have difficulty in attracting qualified staff, just as TMRMC has had, it will be able to obtain adequate staff for the proposed facility. HCAC may do so, however, at the expense of existing health care providers. Apalachee provides the following programs in District 2: Wateroak--A sixteen-bed long-term psychiatric hospital for the treatment of children and adolescents. It is a licensed Specialty hospital; In November of 1987, Apalachee began construction of an acute care facility, which will provide inpatient short- term psychiatric services; Case Management Services--Case management services, which include supportive counseling, medication therapy, assistance with transportation and home visitation, are provided to the chronically mentally ill on an outpatient basis. The Services are to be provided where the patients reside; Hilltop--A sixteen-bed residential treatment center. Hilltop is a group home living facility for adults eighteen to fifty-four years of age; Chemical Dependency Program--Individual, group and family counseling and educational services on an outpatient basis for Individuals with suspected substance abuse problems; Emergency Services--Year-round, twenty-four hour a day telephone or face-to-face evaluations to persons with an acute disturbance or who are in need of evaluation for determination of the proper level of care; PATH--Positive Alternative to Hospitalization Program, a crises stabilization unit developed as an alternative to short-term psychiatric care; PPC--Primary Care Center, a nonhospital medical detoxification unit providing short-term detoxification care to alcohol abusers; Gerontological Programs--Made up of the GRTS program and an outpatient component. Through the outpatient component, Apalachee uses its outpatient clinics in each County in its service area to provide linkage for therapy and medication and supportive counseling to geriatrics; ARTS Program; and Designated Public Receiving Facility--Apalachee is the designated public receiving facility for Subdistrict 2B. It screens and evaluates every person admitted to Chattahoochee. Apalachee's adult mental health programs which are available to indigent patients, directly impact both long and short-term hospital utilization, lowering such utilization. For example, before establishing the services provided to suspected substance abusers, many patients were placed in long-term psychiatric hospitals. Referrals to TMRMC of patients under the Baker Act have been reduced from an average of fifteen to eighteen patients per day to an average of one-half to one person per day. There has also been a decrease in admissions to Chattahoochee since Apalachee established the GRTS and ARTS programs. At the time of the formal hearing of these cases TMRMC had a census of only twenty-eight adult patients in its short-term psychiatric facility. TMRMC's census has been low for the past two years. TMRMC's short-term psychiatric facility is operating at a loss. Any further loss of patients would have a serious impact on the facility. From October 1, 1986 to July 31, 1987, TMRMC lost $127,337.00 on its short-term psychiatric facility. For the twelve-month period from October 1, 1986 to October 1, 1987, it is reasonably estimated that TMRMC will lose $139,722.00. TMRMC would like to open the fifteen-bed unit (which is presently closed) of its short-term psychiatric facility. It must increase its census before it can do so. It has been attempting to increase its census by sending out mail-outs and newsletters, sponsoring educational programs advertising, inviting health care professionals to the facility and initiating clinical affiliations with university programs. Rivendell is an eighty-bed long-term psychiatric facility. Forty of its eighty beds are licensed for adults and geriatric patients. The other forty beds are licensed for children and adolescent patients. Rivendell's census at the time of the formal hearing of these cases was six to eight patients. Chattahoochee has a total of 823 long-term psychiatric beds for adults and geriatrics. There are no like and existing long-term psychiatric beds for adults and geriatrics located in Subdistrict 2B. The only like and existing long-term psychiatric beds for adults and geriatrics available to residents of District 2 are located in Subdistrict 2A at Rivendell. The proposed HCAC facility will result in increased competition in District 2. This increase in competition will have an adverse impact on suppliers of inpatient psychiatric services. Admissions to the proposed facility will likely include patients who would be more appropriately hospitalized in a short-term facility. Although HCAC has no plans to admit short-term patients and will attempt to prevent such admissions, mental health professionals cannot accurately predict the length of a patient's stay upon admission. The determination will often require an in- hospital evaluation of the patient. Therefore, patients more appropriately treated in a short-term facility such as TMRMC will end up spending some tide in HCAC's proposed facility. TMRMC will lose patient days if the HCAC facility is constructed. This will adversely affects TMRMC's occupancy rate, which is already low, and cause further losses in revenue. Given the surplus of long-term psychiatric beds in District 2 and the low occupancy of short-term beds in Subdistrict 2B, it will difficult for HCAC to continue in existence without admitting short-term psychiatric patients. The operation of the proposed HCAC facility will also adversely affect the availability of nurses to staff Apalachee's acute care facility and other Apalachee operations and TMRMC's ability to staff its short-term psychiatric facility. Even the loss of one more full-time registered nurse at TMRMC could cause critical staffing problems. Because of the lack of need for fifty additional long-term psychiatric beds in District 2, HCAC's proposed facility would also have an adverse affect on Rivendell. The proposed facility will provide internships, field placements and semester rotations for psychiatrists, psychologists, social workers, nurses and counselors. The facility will work closely with community agencies and community personnel in developing, operating and providing resources for training for community groups, patient groups and personnel. In- service training will be open to selected professionals in the community. HCAC's proposed facility will have a positive effect on the clinical needs of health professional training programs and schools for health professions in District 2. The-total estimated cost of the proposed project approved by the Department is $4,108,000.00. HCAC plans on financing 100 percent of the cost of the project with a mortgage loan at 13 percent interest. Mr. Estevez has had experience in obtaining financing for health care and other commercial projects. In 1987 alone, Mr. Estevez was personally involved in over $20,000,000.00 of financing. Short-term financial feasibility means the ability to successfully fund a project to ensure that the project will succeed in the short-term. To achieve short-term financial feasibility, there must be sufficient funds to cover any losses incurred during the initial operating period and to cover any short fall in working capital necessary to fund the project. NCNB, a financial institution with which Mr. Estevez has had, and continues to have, a long and profitable association, has indicated interest in financing the proposed project. A financing letter to this effect has been provided. Although the letter does not specifically refer to the proposed project, the weight of the evidence supports a finding that NCNB would be willing to finance the project. In light of Mr. Estevez's experience in obtaining commercial financing and his relationship with NCNB, it is reasonable to conclude that 100 percent financing of the project can be obtained at 13 percent interest. The proposed project will have a negative cash balance at the end of its first and second year of operation. Given Mr. Estevez's commitment to the project, sufficient funds for capital and operating expenses will be available to cover these negative cash balances. Although Mr. Estevez did not provide a separate audited financial statement, the weight of the evidence proved that Mr. Estevez has the ability to provide the necessary capital. In the short-term, HCAC's proposal is financially feasible. HCAC has projected that it will operate at an average length of stay of ninety days. It will charge an all-inclusive $350.00 per day for its long- term psychiatric services, including all ancillary services. Initially, HCAC projected the following payor mix: Medicaid of 30 percent; Medicare of 20 percent; and insurance and private pay of 50 percent. HCAC was informed by the Department that Medicaid reimbursement was not available for psychiatric services in private free-standing psychiatric hospitals. Consequently, HCAC modified its payor mix by eliminating Medicaid from its payor mix. At the formal hearing of this case, HCAC projected the following payor mix: Medicare of 3.3 percent; indigent of 5.6 percent; and insurance and private pay of 91.1 percent. Medicare reimburses for psychiatric care in a limited fashion. That is why HCAC reduced its projected Medicare reimbursement to 3.3 percent of its total revenue. Medicare patients generally use the majority of their lifetime reserve Medicare reimbursable days for other types of care, including short-term psychiatric care and acute care. Persons in need of long-term psychiatric care generally have a poor work history because of their illness interferes with their ability to obtain and maintain employment. Patients have few economic resources of their own. A patients family structure is often disorganized as a result of the patient's episodes of illness. These episodes strain the family relationship. Persons in need of long-term psychiatric care are often unable to pay for needed services and their family members are either unable or unwilling to support the person. There is no facility in Florida with a payor mix of 91 percent insurance and private pay. HCAC's projection of 91.1 percent insurance and private pay is not a reasonable projection. This finding of fact is based upon the high poverty levels within Subdistrict 2B, the lack of need for additional long-term psychiatric beds and the failure to prove that insurance benefits for long-term care are available in District 2. The State of Florida, Employees Group Health Self-Insurance Plan does not provide coverage for specialty hospitals, such as HCAC's proposed facility. The State of Florida provides 42 percent of the employment in Leon County. Insurance provided by other employers in the area limits coverage for inpatient psychiatric care to thirty to thirty-one days. These benefits are often exhausted before long- term care becomes necessary. In order to achieve a 91.1 percent insurance and private pay payor mix, 80 percent to 100 percent will have to be private pay patients. Such a high percentage of private pay patients is not reasonable. The effective buying income in Leon County in 1986 was approximately $22,600.00. In District 2 it was $18,700.00. Madison County and Jefferson County are among the counties heading Florida's poverty rate. Taylor County is the ninth poorest county in the State. HCAC has projected a 95 percent occupancy rate for its proposed facility within six months of its opening. HCAC has failed to prove that this occupancy rate can be achieved. In light of the high poverty rate in the area, the lack of need for long-term psychiatric services and the inability of patients to pay for such services, this projected occupancy rate is not reasonable. In light of HCAC's failure to prove that there is a need for the proposed facility or that its payor mix is reasonable, HCAC has failed to demonstrate that its occupancy projection is achievable. HCAC has projected that 7.3 percent of its gross revenue will be deducted as revenue deductions. Included in this amount are contractual allowances, charity care and bad debts. Medicare reimburses hospitals for total costs rather than revenue or charges. HCAC, therefore, gas projected approximately $6,000.00 for the first year and $24,000.00 for second year as contractual allowances. HCAC's projection of deductions from revenue are not reasonable. Bad debt of 1.6 percent is unreasonable compared to the experience at other long- term psychiatric facilities in Florida. The $350.00 all-inclusive charge is not reasonable. This charge will not be sufficient to cover the proposed facility's costs. HCAC's projected costs for "Supplies and other" and for taxes are reasonable. HCAC has failed to prove that its proposed facility is financially feasible in the long-term. The projected and approved cost of construction is $3,965,456.00. HCAC has indicated that the facility will consist of two, one-story buildings connected by a hallway. The facility will have approximately 40,563 gross square footage. The actual site for the project has not been selected or purchased. The floor plan calls for twenty-five, semi-private rooms for patients. The patient-care building will contain four independent and secure living/program areas connecting to a central core which will contain an atrium open to the outdoors. There will be approximately 811 gross square feet per bed, which is adequate. The proposed design is reasonable. The projected completion forecast of HCAC is reasonable. The projected costs of completing the building are reasonable. The building will be built by Project Advisers Corporation (hereinafter referred to as "PAC"). PAC is a health care, commercial and residential construction company. Mr. Estevez owns 100 percent of PAC. Since 1978, PAC has been involved in the construction of St. John's Rehab Center and Nursing Home, South Dade Nursing Home, Hialeah Convalescent Center, South Dade Rehab Hospital and two psychiatric/chemical dependency hospitals for Glenbeigh Hospital. Generally, there are no differences in the construction requirements between short-term and long-term psychiatric facilities.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED the Department enter a Final Order denying the application of HCAC for a certificate of need to construct and operated a fifty-bed long-term psychiatric facility in Leon County, Florida. DONE and ENTERED this 3rd day of May, 1988, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of May, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-4373 and 864374 The parties have submitted proposed findings of fact it has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommend Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. HCAC's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 5-6. The third through fourth sentence are hereby accepted. 1 and 6. 3 1 and 39. 4 6 and 9 5 7. 6 8-10, 34 and 97. 7 11. 8 11, 14 and 76. The last Sentence is not supported by the weight of the evidence 6. The last sentence is not supported by the weight of the evidence. 10 10 and 69. 11 Hereby accepted. 12 39-40. 13 These proposed findings of fact are cumulative, subordinate and unnecessary. They deal with the weight to be given to other evidence. 14 42. 15-19 Although these proposed findings of fact- are generally true, they are cumulative, subordinate and unnecessary. The first sentence is not supported by the weight of the-evidence. The rest of the proposed findings of fact are hereby accepted. Although the proposed finding of fact contained in the first sentence is generally true, it is cumulative, subordinate and unnecessary. The rest of the proposed findings of fact deal with the weight to be given to other evidence. These proposed findings of fact are not supported by the weight of the evidence. 23-26 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 27 Although this proposed finding of fact is generally true, the weight of the evidence failed to prove that HCAC will be able to achieve its plans. 28-33 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 34 43. 35 51. The last sentence is not supported by the weight of the evidence. 36 52. 37 53. 38 69-70. 39 72. 40 73. 41 74. 42 67. 43 68. 44 34 and 37. 45 104. 46. The first sentence is law. The last sentence is accepted in 105. 47 97 and 99-100. 48 101. 49 103. 50 102. 51 Hereby accepted. 52-53 These proposed findings of fact deal with the weight to be given other evidence. 54 78. 55 79-80. 56 79. 57-58 Not supported by the weight of the evidence. 76. The last sentence is not supported by the weight of the evidence. Not supported by the weight of the evidence. Although generally correct, these proposed findings of fact do not support HCAC's projected utilization. Irrelevant. Not supported by the weight of the evidence. Irrelevant. 65 92. 66 93. 67 94. The last two sentences are not supported by the weight of the evidence. 68 95. Not supported by the weight of the evidence. HCAC's proposed facility and TMRMC are not comparable. 71-75 Not supported by the weight of the evidence. 54 and 59. The last sentence is not supported by the weight of the evidence. The first two sentences are hereby accepted. The last sentence is not supported by the weight of the evidence. Irrelevant. 79-83 Not supported by the weight of the evidence. 84-85 Statement of law. Hereby accepted. 6 and 25. The last sentence is not supported by the weight of the evidence. 88-90 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 91-92 Not supported by the weight of the evidence. 93 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. The last two sentences are conclusions of law. 94-95 Not supported by the weight of the evidence. Irrelevant. The first sentence is a conclusion of law. The second sentence is hereby accepted. The last sentence is irrelevant. 13. The last two sentences are conclusions of law. Irrelevant. 100-102 Hereby accepted. Not supported by the weight of the evidence. Hereby accepted. 44. The last sentence is irrelevant. 47. The last sentence is not supported by the weight of the evidence. 16. The last sentence is not supported by the weight of the evidence. 108 15. Not supported by the weight of the evidence. Irrelevant. See 23. The last sentence is not supported by the weight of the evidence. Conclusions of law. Not supported by the weight of the evidence. 114 34. 115 29. The last sentence is not supported by the weight of the evidence. 115a 30. The last sentence is not supported by the weight of the evidence. 115b-e 30. The next to the last sentence of e is not supported by the weight of the evidence. 115f Not supported by the weight of the evidence. 116-117 Not supported by the weight of the evidence. 118 Hereby accepted. 119-120 35. 121 Irrelevant. 122 33. 123-124 Irrelevant. 125-129 Not supported by the weight of the evidence. 130 3. 131 Hereby accepted. 132 64. The last sentence is not supported by the weight of the evidence. 133 See 49 and 65. 134 54. The last two sentences are not supported by the weight of the evidence. The Department's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 Hereby accepted. 2-3 8-9. 4 Not supported by the weight of the evidence. 5 13 and 25. Not supported by the weight of the evidence. Conclusion of law. 8 31. 9 Not supported by the weight of the evidence. 10-12 Irrelevant. 13 Not supported by the weight of the evidence. 14-16 Conclusions of law. TMRMC's Proposed Findings of Fact 1 1, 6 and 9-11. 2 See 6 and 9. 3 6-10. 4 76. 5 77-78. 6 79. 7 79-80. 8 Hereby accepted. 9 81. 10 82-83. 11 34 and 36. 12 36. 13 6. 14-15 39. 16 41-42. 17 2. 18 3. 19 4 and 6. 20-21 54. 22 Not Supported by the weight of the evidence. 23 54. 24 46 and 54. 25-26 54-55. 27-29 54. 30 54-55. 31 44-45, 47 and 54. 32 Hereby accepted. 33 54-55. 34 55. 35 Irrelevant. 36 56. 37 58. 38 49. 39 48. 40 50. 41-44 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 45-46 65. 47-48 57. 49 58. 50 63-64. 51 Not supported by the weight of the evidence. 52 63-64. 53 63-64. 55 Hereby accepted. Not supported by the weight of the evidence. 56 65. 57 Not supported by the weight of the evidence. 58 25 and 59. 59 Not supported by the weight of the evidence. 60-62 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 63 25 and 59. 64-68 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 69 Not supported by the weight of the evidence. 70-71 27. Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. Not supported by the weight of the evidence. 74 18 and 96. Irrelevant. Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 77-81 Although generally true, these proposed findings of fact are not relevant to this de novo proceeding. 82 Hereby accepted. 83 84. 84 Hereby accepted. 85-86 Irrelevant. 87 See 69 and 72. 88 94. 89 Hereby accepted. 90 74. 91 94. The last three sentences are not supported by the weight of the evidence. 92-93 Not supported by the weight of the evidence. 94-96 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 97 19. 98-99 18. Hereby accepted. Irrelevant. Hereby accepted. 103 19. 104 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 105 20. 106 21. 107 Hereby accepted. 108-110 See 23. 111 Not supported by the weight of the evidence. 112 85. 113 86. 114 88. 115 89. 116-118 Although these proposed findings of fact are generally true, they are cumulative, subordinate and unnecessary. 119 91. 120 90. 121 96. 122-126 Not supported by the weight of the evidence. 127 Hereby accepted. 128-129 Irrelevant. 130 22. 131 97-98. 132 99. 133-139 Not Supported by the weight of the evidence. 140 95. 141 Not supported by the weight of the evidence. 142 97. 143-146 Not supported by the weight of the evidence. Apalachee's Proposed Findings of Fact 1 6 and 8-9 2 4. 3(a)-(i)(1) 54. 3(i)(2) 44-45. 3(j) 44 and 54. 3(k) 54. 4 3. 5 1. 6 104. 7 39 and 41. 8 27 and 60. 9 25 and 59. 10(a) Not supported by the weight of the evidence. 10(b) 27. 10(c) 26. 10(d) Not supported by the weight of the evidence. 11 13. 12(a) 81. 12(b) 82-83. 13 6 76 and 87. The second, third, fifth- eighth sentences, the Second Paragraph and the last Paragraph are not Supported by the weight of the evidence. 71 and 74. Other than the first two Sentences of the first Paragraph and the first two sentences of the third Paragraph, these Proposed findings of fact are not Supported by the weight of the evidence. 16(a) 90. The Second Paragraph is not Supported by the weight of the evidence. 16(b) 88. 16(c) 94. 16(d) 76 and 95. Other than the first three sentences of the first Paragraph and the last Paragraph, these Proposed findings of fact are not Supported by the weight of the evidence. 17 48-49 and 65. The Sixth and eighth Sentences and the last Paragraph are not Supported by the weight of the evidence. 44-47 and 54. The last Sentence of the first Paragraph and the last four Sentences of the last Paragraph are irrelevant. 19 62. 19(a) 3, 23, 56-57 and 64. The Second and third Paragraph are Cumulative and unnecessary. 19(b) 63. The Second Paragraph is Cumulative and unnecessary. 19(c) Cumulative and unnecessary, 19(d) 25, 59, 62 and 66. 19(e) 65. 20 Not Supported by the Weight of the evidence or Cumulative and unnecessary, 21 39 and 41. The last Paragraph is not Supported by the weight of the evidence. COPIES FURNISHED: Jean Laramore, Esquire Anthony Cleveland, Esquire Post Office Box 11068 Tallahassee, Florida 32302 Ronald W. Brooks, Esquire 863 East Park Avenue Tallahassee, Florida 32301 Theodore E. Mack, Esquire John Rodriguez, Esquire Department of Health and Rehabilitative Services 1323 Winewood Boulevard Building One, Room 407 Tallahassee, Florida 32399-0700 Darrell White, Esquire Gerald B. Sternstein, Esquire Post Office Box 2174 Tallahassee, Florida 32301 Sam Power, Clerk Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 Gregory L. Coler, Secretary Department of Health and Rehabilitative Services 1323 Winewood Boulevard Tallahassee, Florida 32399-0700 =================================================================
Findings Of Fact The parties further stipulated at the hearing that the billing for which Shands seeks payment does not include charges for services rendered during the months Linda Sue Austin was being treated as an out-patient at Shands. All other facts, as stipulated to by the parties and as set forth above, are hereby adopted.
